Resolving Estate Debts: Help from Our Probate Attorneys in Fort Collins

One key component of probate is resolving the deceased person’s estate debts. Only after this is done can their remaining assets be distributed to named beneficiaries. 

Our probate attorneys in Fort Collins can help personal representatives resolve estate debts by identifying them, informing creditors, reviewing claims, and paying in the correct legal order. Once these have been taken care of, the rest of your loved one's assets can be handled as they intended. 

Finding Debts

During probate, a personal representative will be appointed to handle the estate. Because these matters can be complex, it is helpful to have a probate attorney who can assist with this process.

One of the first actions to take after this person has been appointed is finding every estate debt. These can come from many different places, including a person’s healthcare costs, business expenses, household bills, and more. 

Common types of estate debts include:

  • Credit card debt: Outstanding credit card balances must be paid after a person passes away. 

  • Business debt: If the deceased person’s business owes any money, such as business loans or vendor bills, it must be paid back, depending on the structure of the business.

  • Mortgage debt: Any unpaid mortgage balance on a person’s house will need to be addressed. 

  • Medical bills: Medical bills are not the responsibility of a deceased person’s loved ones; instead, they are the responsibility of the estate. There are a few exceptions to this, such as co-signers, joint account holders, and more. 

  • Household bills: These might include unpaid rent, utility bills, electric bills, or anything else related to household expenses. 

  • Loans: Personal loans and auto loans are two examples, each of which will be handled differently. 

  • Taxes: Any unpaid taxes must be taken care of, such as property taxes or income taxes.

  • Funeral expenses: Burial and memorial costs need to be addressed.

  • Probate costs: Probate itself costs money, including fees for court filings, the personal representative, attorneys, etc.

Notifying Creditors

The next step of probate is legally notifying creditors. The personal representative is responsible for telling all parties who are owed money that the estate is being handled. This allows everyone the opportunity to submit a claim for the money they believe they are owed. 

There are two main forms of notification for creditors: 

  • Written notices: These refer to official letters sent by the personal representative to known creditors. 

  • Public notices: These refer to official publications in newspapers or online publications to reach creditors that might not be known. 

Reviewing Claims

After creditors have submitted claims, the personal representative must then review and validate each claim. This portion of the process involves making sure each debt is real and determining how much is owed. Though some claims will be approved, others may be disputed and rejected if they are not valid. 

Here are examples of instances when a claim is not valid:

  • The claim has been filed after the deadline that was determined by state probate laws

  • The debt is too old to collect 

  • There is not enough proof for the claim

  • The debt has already been paid

  • The debt belongs to someone else 

  • The claim reflects an incorrect number 

  • The debt has been discharged before the person passed

Paying in Order

Once debts have been identified and validated, they need to be paid. If an estate does not have the funds to pay back all debts owed, it must follow the legal order for paying. In some cases, this may result in some creditors not getting paid.  

In Colorado, it generally must follow this order: probate expenses, funeral expenses, specific taxes and federal debts, necessary healthcare expenses from the deceased person’s last illness, and any child-support costs. However, the order can also depend on the circumstances. 

After this, all other debts will be addressed with the remaining funds. 

Distributing Remaining Assets

If there are any remaining funds after all debts and taxes have been paid, what is left will be given to the beneficiaries. If the deceased person has left a will, assets will be transferred to named beneficiaries as outlined.

In the case of intestacy, meaning that there is no will, assets will be distributed according to state law. Assets are typically given to legal heirs, including spouses and children.

Frequently Asked Questions

Are family members responsible for paying their loved one's debts?

No, family members are not typically responsible for paying back their loved one’s debts. However, there are several important exceptions, such as co-signing a loan or holding a joint account.

How do creditors find out about someone’s passing?

Creditors find out about someone’s passing through written notices sent directly to them, public notices in newspapers or other publications, or both. Personal representatives are responsible for these notices.

What happens when an estate doesn’t have enough money to cover debts?

If an estate does not have enough to pay back debts, each debt must be paid in the legal order outlined by the state. 

What happens to a person’s assets if there is no will?

If there is no will, a person’s assets are handled as outlined by state law after estate debts have been settled. 

MKP Law Probate Attorneys in Fort Collins  

MKP Law is committed to serving our local community with legal assistance for a range of different needs. 

We have attorneys who specialize in probate, and they can guide you through the process and settle any estate debts so that your loved one’s assets can be distributed accordingly. Estate planning attorneys are also available to help families get ahead of and potentially avoid the probate process altogether through a strategic estate plan. 

Reach out today to get in touch with our estate planning and probate attorneys in Fort Collins.