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This has come up twice in the past week.

In one instance someone asked me if they could file an ‘estate bankruptcy’ because the person who died had a lot of debt and there was not enough money to pay all of the outstanding bills. In another instance someone said that they knew that the children were responsible for their parent’s bills when they died.

Bankruptcy is only available for living beings or businesses. An estate can’t file for Bankruptcy. If there isn’t enough money to pay all of the debts, the estate is just considered ‘insolvent’.

If you are the executor or administrator of an insolvent estate, you are not automatically personally responsible for the payment of all of the debts, but you should make sure that you know the order in which to pay any of the debts because if you pay them in the wrong order you might be held personally responsible for the wrongful payment amount.

If you are not the executor or administrator of the insolvent estate, and you haven’t signed something saying that you have accepted responsibility for a parent’s debt, it is not your debt and you do not have to pay. Remember this when someone puts a paper in front of you to sign that you will accept responsibility to pay.

In fact, if you are not the executor or administrator of an estate, you don’t need to do anything at all.

You are not automatically responsible for your parent’s outstanding debts when they die just because you are the child.

Of course, if there are any assets in the estate, those assets should be used first to pay any bills and the heirs will only receive what is left. If there isn’t enough to pay all of the debt, there won’t be any left for the heirs.

So what happens to that unpaid debt? It just doesn’t get paid at all. It is usually just ‘charged off’ by the debtor as uncollectible.

If you are worried that you might have to pay someone else’s debts after they have died, you might want to consider talking to a probate attorney or the official who handles probate matters where the person died.

If you have any questions about this or any other legal subject, please feel free to give us a call at 757-234-4650 or visit our website at http://www.BeaversLaw.com.