Once you probate an estate, the clock starts ticking on existing creditors.

Lets say mom dies and she has a whole bunch of creditors and unpaid debt.

Where does her debt go? Is it just erased when she dies?

NO, her debt will not be erased when she dies. In Connecticut, you’d bring her will to probate and you’d open an estate and within 14 days after someone is appointed executor (your mom can *nominate someone as executor in her will), you’d need to publish a notice to creditors in the newspaper that your mother has passed. This is what your typical “notice to creditors” looks like. It’s a public notice.

Then you wait 6 months – In Connecticut, that’s the statutory “creditors claim” period you need to wait for creditors to come out of the wood work. In Massachusetts, that period of waiting is one whole year.

So some major creditors actually hire people to scan the legal notices every day and look for people who owe them money.

In today’s day and age its kind of an arbitrary system – like who actually reads the newspaper?

It’s a benefit to you though because a lot of creditors don’t read the newspaper and don’t have paid “Scanners” looking for legal notices about claims. So many creditors don’t come forward in the estate, but there’s no gaurantee on who will or will not come forward. All of moms creitors may come after her, some may, or none… it’s a crapshoot.

If a creditor establishes a claim against the estate, you can negotiate with them and try to pay them off with a lower amount.

You personally won’t be liabile for any of your mother’s debts. But her “estate” will – her estate is everything she owns mushed together and jammed through the probate system like a meat grinder.

So her house, money, etc… will be used. Assets that pass outside of probate like POD accounts, will not be immediately subject to creditors claims although creditors can still come after them… This is a tricky maneuver though and I personally haven’t seen it happen. Typically creditors will take what they can get from the estate.

The worst creditor is any state agency – like Medicaid in Connecticut (which is state and federally funded.) They will nickel and dime you. Their claim will be enforced by the Department of Administrative Services (DAS), and they are reluctant to haggle or negotiate.

I have seen the DAS literally take dead people’s last nickels and dimes. One man had old pennies that were worth about a dollar a piece in a safe deposit box at the bank, along with birthday cards his daughters had sent him.

DAS first gave the birthday cards a value, which was like $2 or something. But then they “generously” allowed the family to keep the birthday cards, but the $5 worth of old coins they had to take.

Now, on one hand you can get mad at state agencies for being so greedy, but also keep in mind its the law. Federal law REQUIRES the state to activate claims against decedents who owe certain debt, like medicaid. In turn, this results in a perceived ruthlessness from state claimants.

Anyway, private creditors you can haggle. The state, not so much.

Oh, and keep in mind – mortgages are not the same as “creditors.”

A mortgage is a legal interest in your land recorded in the registry of deeds. If that sounds like legal mumbo jumbo it kind of is, but here’s what it means practically – a mortgage means someone else “kind of” also owns your house with you. So when you die you can’t just negotiate with mortgage debt, because the house is “kind of” theirs also (until you pay it off) they can put a lien on the house whenever they stop getting payment…

Take care yall!