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What is the Priority of Estate Debts?

The priority of estate debts is an issue that arises during the probate process that follows after a person has died in North Carolina. When a decedent leaves behind debts, those debts have to be repaid with estate funds. The priority of estate debts determines what debts get repaid, and in what order. Today we are going to take a closer look at the priority of estate debts.

Who determines the priority of estate debts?

Each state has laws that determine the priority of estate debts. For example, let’s say that someone in North Carolina dies and leaves behind assets and debts. Once someone opens a new estate case with the Clerk of the Superior Court, the clerk will appoint an estate administrator, also known as an executor or personal representative. The administrator will take control of estate property and allow creditors to file a claim if they believe the decedent owed them money. The administrator will then begin repaying those claims in a specific order. The order in which the administrator repays those debts is determined by the priority of estate debt rules.

Who is responsible for repaying estate debts in the proper order?

The responsibility of repaying estate debts falls to the estate administrator. The administrator has the legal authority to use estate funds to repay any estate debts. Creditors have to submit claims if they wish to be repaid.

Unfortunately, it’s sometimes common for creditors to contact relatives of a deceased person in an attempt to collect estate debts. Even though the creditors might know that they have to file a claim with the estate to get repaid, they can try to convince relatives that they are personally responsible for repaying estate debts, or try to convince them to take on the debt themselves.

The only time a relative is responsible for repaying the debts of a deceased family member is if that relative held the debt jointly with the decedent. Otherwise, family members are not legally obligated to repay estate debts, regardless of what creditors might say.

What happens to estate debts if there isn’t enough money in the estate?

It’s possible for an estate to not have enough assets to repay all of its debts. These are known as insolvent estates. In such situations, the administrator will use estate funds to repay debts in the order as determined by the priority of debt rules. Once the administrator has used all estate assets, the remaining creditors will not get repaid.

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