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Insolvent estate??

Harrisburg, PA |

My dad died January 12, 2013. We jointly owned a home (appraised at 70000, owed 81000 @ time of his death) He had $481 in the bank (until his owed december ss check was directly deposited after his death on Jan 16 which brought it to $2054) and owned two low value automobiles. I had to become the administrator of his will because his lawyer at time of writing is now a judge. I tranferred vehicles to my name to continue insurance coverage. So my question is, do i have to pay the hospital bills and credit card debts from the estate? His funeral costs were 2700. I had to pay some of that out of my pocket since there was not enough in his bank account. Am i required to sell the two automobiles to pay creditors and hospital bills?

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Attorney answers 4

Posted

There is an order of priority as far as what you have to pay in what order in an insolvent estate. Depending on what the credit card bills are for, they may be the lowest priority and you may not even have to pay them if there's no money left after the higher priority stuff is paid. For example, higher priority is given to administrative costs, the family exemption (if he was not married at the time of his death and you lived with him in that jointly-owned home, please look into this -- it could mean that you come away with something), funeral expenses (you may get some reimbursement), medical bills from last 6 months, etc.

I have pasted a copy of the statute just so you have an idea what's going on. I still don't necessarily expect you to be able to do this all on your own without legal advice even after reading this, because estate administration is not easy. But I want you to know that there is an order to how you are expected to take care of his affairs, and that your possible family exemption and reimbursement for estate/funeral expenses come before other, non-medical types of debts. Between reimbursement for the funeral expenses, admin expenses., and funeral, and the family exemption, you may end up with a fair amount of the assets.

Also, as one of the other attorneys said, there are notices and documents that have to be prepared, sent to the proper people, and or filed with the court, and you could get in trouble with the court if they're not done properly and on time. My county (Chester) gives out a packet with the forms and instructions; not sure if Dauphin does.

Here's a copy of the statute -- it's from Title 20:

§ 3392. Classification and order of payment.

If the applicable assets of the estate are insufficient to pay all proper charges and claims in full, the personal representative, subject to any preference given by law to claims due the United States, shall pay them in the following order, without priority as between claims of the same class:

(1) The costs of administration.

(2) The family exemption.

(3) The costs of the decedent's funeral and burial, and the costs of medicines furnished to him within six months of his death, of medical or nursing services performed for him within that time, of hospital services including maintenance provided him within that time, of services provided under the medical assistance program provided within that time and of services performed for him by any of his employees within that time.

(4) The cost of a gravemarker.

(5) Rents for the occupancy of the decedent's residence for six months immediately prior to his death.

(5.1) Claims by the Commonwealth and the political subdivisions of the Commonwealth.

(6) All other claims.

(Feb. 21, 2006, P.L.45, No.17, eff. imd.)

If my answer was helpful to you, I would appreciate if you would mark it either "helpful" or "best answer" if you feel that applies, as AVVO gives us rating points based on feedback. Thank you! Please note that the above answer is not to be construed as legal advice. It is my personal opinion based on your question, and it was given without obtaining the detailed information that I would normally request in order to render comprehensive legal advice. I advise you to consult with a local attorney of your choosing to obtain specific legal advice. The fact that I answered your question does not create an attorney-client relationship between you and me.

James P. Frederick

James P. Frederick

Posted

Very helpful answer and very well stated.

Rochelle S. Rabin

Rochelle S. Rabin

Posted

Thank you. I was surprised that nobody else brought this up.

Posted

Hello ... my condolences ...

As Administrator of your Dad's estate, you have to pay creditors from the assets before you distribute anything to anyone. The transfer of the cars to you is a distribution, which puts you on the hook as far as the creditors go.

I would consult an experienced attorney. Yeah, I know - I hate using that answer also, but in good times it is often the best answer and in bad times it is often the only answer.

Good luck ...

John

John B. Whalen, Jr., J.D., LL.M. Profile

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Although we invite you to contact us and welcome your calls, letters, and electronic mail, please remember that this information is for informational purposes only, and does not create an attorney-client relationship. This website is not intended to be the rendering of legal advice for specific cases, you should not act upon this information without seeking professional counsel, and you should consult an attorney for advice regarding your individual situation. Good luck. John

Asker

Posted

There is no money. Mine or estate.

John B. Whalen Jr.

John B. Whalen Jr.

Posted

Then you will end up with the amount of the vehicles and still have the creditors. Either way, it seems that in either case, it will still be an Insolvent Estate. I would not want want you paying creditors in the wrong way.

Posted

You do not have to pay for estate expenses out of pocket, but you do have to pay creditors claims before distributing any assets to yourself. Therefore, as my colleague pointed out, it was not proper to transfer title to the vehicles to yourself personally, as they should be sold to pay for debts. In terms of the credit card bills, you should try to negotiate these down, explaining that your father is deceased and the estate is insolvent. They usually work with you under these circumstances.

Best wishes.

Please note that I am answering this question as a service through Avvo but not as your attorney and no attorney-client relationship is established by this posting. An attorney-client relationship can only be established through signing a Fee Agreement and paying the necessary advanced fees.

Rochelle S. Rabin

Rochelle S. Rabin

Posted

I'm with you re not transferring title to the cars prematurely, but please note that Pennsylvania has a family exemption for which the asker may qualify (i.e. family members stand to get a certain amount of cash or valuable property ahead of creditors), there's a statutory order in which the bills have to be paid AND the asker may be entitled to reimbursement for expenses already paid, so 1) he/she may end up with more than what would be indicated by your answer, and 2) the estate may run out of cash before even getting to the credit card bills, so there's no point even talking to the companies yet until other than to say that the estate is insolvent and we don't know if there will be anything for you. I don't know if AZ law runs accordingly, but this is how PA estates work.

Celia R Reed

Celia R Reed

Posted

Thank you for the detailed explanation of PA law. I really appreciate it. The law is AZ is slightly different in terms of the family exemption, but we also have a priority for payment.

Posted

While I also agree with the prior two answers, you need to also make sure you advertise the issuance of letters (opening of the estate) to put a time limit on creditors coming forth indefinitely. Advertising the estate will give creditors one year to make claims. You don't know for sure if there were other creditors as well as the ones you know of. You need to put a limit on their time to sue.

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