When your Debtor Is Dead
I am not a lawyer, I am a Judgment Broker. This article is my opinion, based on my experience in California, and laws vary in each state. If you ever need legal advice or a strategy to use, please contact a lawyer.
What if your judgment debtor dies? Whenever there is a death, there might be Probate. Probate is a court hearing and a process, to verify and oversee the ownership transition of a deceased’s possessions.
Many people with assets think that if they have completed a will, when they die, everything automatically goes to their heirs as they specified. If the value of their estate is small, this could happen.
When the value of an estate is substantial, probate court is often involved, unless the deceased had their assets in a living trust (or perhaps another kind of trust). It is possible for a creditor to force a probate to be opened, in California, see CCP 366 and probate court code 9391. Liens like a California JDX one-year lien probably will survive the death of a judgment debtor, see CCP 2872.
A correctly formed living trust may bypass probate court, because trusts prove the ownership titles of its listed assets, so usually no probate court decision is required.
People who die with their assets in a correctly formed living trust, can keep their estate out of probate court and the public’s eye. Their heirs can inherit assets without public disclosure of who got what.
When someone owning assets (not in a trust) dies, with or without a valid will, their assets usually must go through probate court before anything is passed on to the intended beneficiaries.
Just because a will says Bob gets the house and Jenny gets the Mercedes, does not mean that the day after dad dies, Bob and Jenny immediately and automatically get the possessions listed in the will.
First, it must be proven in probate court, that the property dad left his kids in the will was owned by dad free and clear. The executor named in the will, administers the estate though probate court and beyond, until all assets, liabilities, and considerations have been taken care of.
If the executor named in the will is not specified or is unavailable, the probate court will appoint one. The probate court verifies that the known creditors have at least a chance to be paid, and that the dead person actually owned the assets named in the will. Finally, the assets are dispersed to the beneficiaries.
Probate court records are part of the public record. Anyone can go to a probate court and view probate records for any dead person, including celebrities. If it is a will or a trust, you will have to get those via a subpoena.
Even when the decedent’s assets are small, sometimes probate proceedings occur when there is a dispute over something with little obvious value. Examples might be sentimental items such as ashes of the deceased, how a retirement account should be split, etc.
Not every probate case involves significant assets. However, a judgment creditor might do well to quickly determine the value of the dead debtor’s estate. The creditor should decide if there might be sufficient assets to at least partially pay the judgment. If there are, then a creditor’s claim should be filed immediately. (The executor often has four months to allow or deny the claim.)
If there seems to be sufficient assets to pay your claim, ask the representative or executor to do so without delay. The reason to act quickly is because assets can disappear with family members, who have no interest in paying a creditor of the decedent. However, sometimes sending a polite letter to the principal surviving relative might work. You may need to follow up with a polite telephone call. You might also have to do a (third-party to the deceased debtor) examination.
As a creditor of the decedent, it is your right to request a listing of the estate’s assets and liabilities, either from the probate court (if it was already filed there) or the attorney of the personal representative or executor if it was not.
If your creditor’s claim is denied without a good cause, you can start an adversarial action in probate court. You should know what you are doing if you represent yourself. Most judges in the probate courts have very little patience with non-related self-represented parties that do not know what they are doing.
Sometimes there is not enough assets left in the debtors’s estate to pay all creditors in full. If this is the case, be willing to compromise as half of something is better than nothing. Sometimes the executor makes an offer to all creditors to settle, in this case, settling is something to strongly consider.