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What if someone dies while they owe your business money?

On Behalf of | Jan 6, 2023 | Business Law |

Trying to collect from someone that owes your company money is a challenge. You have to comply with federal debt collection laws and California consumer protection laws. The longer it takes someone to pay what they owe your company, the harder it may be to secure full repayment for those debts.

If the collection process lasts for long enough, the person who owes your company money might even die before they pay back what they fully owe. Seeing the name of someone who still owes your business thousands of dollars in the local obituaries might make you despair of ever securing repayment. Thankfully, California gives you one more option to recover what that person owed you.

You can make a claim against the estate

In most cases, the executor or personal representative of the estate will need to send your business direct notice of estate administration. They may also publish notice if they are unaware of the deceased person’s obligations to your company.

Once you are aware that estate administration is underway, you will need to act quickly, as you will typically only have a few months, at most a year, to bring a claim. The length of time to bring that claim will depend on how you learned of the individual’s death.

What if the estate can’t pay you in full?

There could be a scenario in which someone dies without enough resources to fully pay your business. Your debt will likely be one of many, and the representative of the estate will need to pay them in the proper order of priority.

Still, your right to repayment takes precedence over the rights of others to inherit from the estate. So long as there is still property, there is still a potential for repayment, provided that your company follows the proper steps.

If there was property but the executor didn’t repay you as they should, you may even be able to bring a claim against the person who handled the probate process. They could be personally responsible for the value of the assets they distributed inappropriately unless they can recover sufficient property to pay the debt in full.

Understanding the rules that apply to posthumous collection activity can help those concerned about securing payment after someone dies.