If you have hired an Estates & Trusts probate attorney, then it is always best to defer to their guidance regarding any debts, Claims or creditors. In addition, remember that it is only in the rarest of occasions that the Personal Representative or any heir or legatee is responsible for any debt of the decedent. Remember as well that any contact you have with a debt collector is likely on a recorded phone line and that Maryland is a “two-party” state in this regard; meaning that in Maryland you must be told and agree to be recorded on any phone call or in any such interaction. So, if you are unsure, do not address the situation and seek assistance from a competent Estates and Trusts Probate attorney.
Generally, the process for anyone or any business or entity that feels the decedent owes them money is to file what is called a Claim Against the Estate with the Court. A Claim Against the Estate operates in many ways like a lien in that the Court will not allow the Personal Representative to close the Estate and distribute to heirs or legatees until they submit Letters of Satisfaction from the Claimants showing that the Claim has been paid..
The conversation above applies generally to unsecured debt. Unsecured debt is debt where no collateral has been secured by the creditor. Conversely, secured debt is debt where the lender has a security interest in an underlying asset, such as with a mortgage or an auto loan. These debts must be paid or the property could be foreclosed or the vehicle(s) repossessed. Likewise, water bills, utilities and insurance should be paid and maintained during the administrative pendency of the Estate.
If an Estate is insolvent (does not have enough assets to cover its administrative expenses, debts and Claims) then the following statutory Priority of Order of Payments applies:
Md. Code Ann. Estates & Trusts § 8-105. Order of payment.
(a) If the applicable assets of the estate are insufficient to pay all claims in full, the personal representative shall make payment in the following order:
(1) Fees due to the register;
(2) Costs and expenses of administration;
(3) Funeral expenses as provided in § 8-106 of this subtitle;
(4) Compensation of personal representatives as provided in § 7-601 of this article, for legal services as provided in § 7-602 of this article, and commissions of licensed real estate brokers;
(5) Family allowance as provided in § 3-201 of this article;
(6) Taxes due by the decedent;
(7) Reasonable medical, hospital, and nursing expenses of the last illness of the decedent;
(8) Rent payable by the decedent for not more than three months in arrears;
(9) Wages, salaries, or commission for services performed for the decedent within three months prior to death of the decedent;
(10) Assistance paid under the Public Assistance to Adults Program, as provided in § 5-407(d) of the Human Services Article; and
(11) All other claims.
(b)
(1) A preference may not be given in the payment of a claim over another claim of the same class.
(2) A claim due and payable is not entitled to a preference over claims not yet due.