Death and taxes seem to be inevitable parts of life. Another concerning factor apparent in the modern world is the amount of personal debt accumulated over time. When a person passes away with personal debt, the estate they left behind is still responsible for settling verified claims. This settlement of the debt takes place during the probate process in North Carolina and across the states (depending on your state.)
According to a 2021 Experian study, the average American holds a debt balance of $96,371! Credit cards, medical bills, mortgages, student loans, and other expenses stack up and often times are left behind when a loved one passes away. When there are assets in the estate, these funds are used to pay verified claims. These claims can eat into the wealth and assets often intended to be left behind to heirs. In this way, generational wealth is eroded. However, what many may not be aware of is that you can often negotiate and reduce the amount of debt owed.
4 tips for reducing the amount of debt owed on an estate
- Use your letters of testament or letters of administration to close all bank accounts owned by the decedent. Then apply for an EIN. Use this EIN to open an estate account to handle all forthcoming transactions. Many banking institutions will transfer the funds from the decedent’s old account directly into the new account or provide a check you can use to deposit into the new account.
- In North Carolina, once you have filed and posted the Notice to Creditors and wait the 90 days from the first posting, gather and make a list of all creditors who have made a claim on the estate. This will help you prioritize which claims to focus on first.
- Leave the paying of the debt to the executor or the administrator. Often times bill collectors will attempt to collect payment. However, there is a priority of claims that should be followed and you should wait until all claims have been filed and all inventory has been gathered before paying off claims.
- Contact each creditor and let them know you would like to resolve the matter and would like to discuss settling for a lesser amount. Although not guaranteed, many creditors will settle for pennies to the dollar and some creditors will even go so far as to write off the entire claim. You never know until you try. However, you do not need to feel harassed by creditors. Remember, the Fair Debt Collection Practices Act grants you the right to request in writing that a debt collector stop contacting you. Once it receives your letter requesting this, the debt collector can only contact you to confirm that it will stop going forward and to tell you that it’s taking specific action, such as a lawsuit.
Settling the affairs of loved one is no easy task. If you are having issues and would like support contact an probate specialist at Estate Pro Service, LLC. Sign up for a free consultation to help guide you in the right direction.
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