When someone passes away, their estate goes through probate, a legal process that ensures proper asset distribution. Before beneficiaries receive anything, the executor pays outstanding debts. The court monitors this process to ensure fair financial obligation handling.
Identifying and notifying creditors
The executor or administrator identifies all outstanding debts, including loans, medical bills, and credit card balances. The executor notifies known creditors and publishes a public notice to reach unknown creditors. Georgia law requires creditors to submit claims within three months of receiving notice from the estate’s executor.
Reviewing and validating claims
The executor examines each claim to confirm legitimacy. Some debts face disputes due to improper documentation or expired legal time limits. If conflicts arise between creditors and the estate, the probate court steps in to resolve them.
Paying debts in order of priority
Probate laws determine the order of debt repayment. Secured debts, such as mortgages and car loans, receive priority since they tie to specific assets. Next, the executor covers administrative expenses, including court fees and compensation. Unsecured debts, such as medical bills and credit cards, come last. If estate funds fall short, some debts remain unpaid.
Handling insolvent estates
When an estate lacks enough assets to cover all debts, it becomes insolvent. Georgia probate law follows a specific order when paying creditors. Funeral expenses, estate administration costs, and taxes receive priority. Next, secured debts such as mortgages are paid, followed by medical expenses from the deceased’s last illness. Finally, general unsecured debts, including credit cards, are addressed if funds remain. Beneficiaries avoid inheriting the deceased’s unpaid debts unless they co-signed or held legal responsibility.
After resolving all valid debts, the executor distributes remaining assets to heirs according to the will or state law. Proper debt settlement allows beneficiaries to receive their inheritance without future financial complications.