Wills, Trusts and TODI, Oh My Round 2 (Collecting what You're Owed, After Death)

Do people who owe you money still have to pay when you die?

Most of the time, Yes! As a general rule debts are not extinguished against the debtor when a creditor dies. As part of the estate process the person left in charge, in Illinois either an administrator or executor/trix, will attempt to marshal the  assets of the estate. This includes any outstanding payment streams or debts owed to the estate.

What happens if it's verbal? Just because a contract is verbal doesn't make it illegal. However, verbal contracts can be very difficult to enforce. Challenges can arise, especially with family members, as to whether a debt was actually created or if there was simply a gift. Additionally, without adequate documentation subsequent enforcement (without regard to if the enforcement is successful) can result in relational strains between family members.

Ok, so what needs to be done to document a debt? Depending on the type of debt and if there is collateral for the debt requirements will differ. Some debts require recording with the county while others may require state level registration. At a bare minimum a note confirming the debt from the debtor to the creditor  is required to properly document a debt but it may not be enough to collect. There may be issues with rates of interest, if the person has some special status that would prevent collection, if there has been a bankruptcy, if too much time has elapsed since the debt went into default, if the person is the subject of a court ordered conservatorship or guardianship, if the person has the ability to pay, and a whole host of other problems that can arise.

How would one ensure that a debt is collected on? This is a great starting point for a conversation with your attorney. There are a host of options to collect on debts owed to you depending on the amount and who owes the debt. A good conversation with an attorney should also include the interpersonal interplay between those who are to receive the funds and what risks if any to those relationships there may be. Take the time to fully explore your options and evaluate how to best proceed in your particular set of circumstances.

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