Business Litigation
Credit collection from deceased debtors
For business owners in Ohio, the situation may arise when someone who owes them money passes away before the bill is paid. While some businesses may choose to forgive the debt and dismiss it, it is important to understand that debt does not simply disappear when the debtor is deceased. Instead, the estate of the deceased becomes responsible for outstanding debts. The Ohio Revised Code, Chapter 2117.25 states that a decedent’s debts shall be paid from the estate in this order:
- Estate administration expenses
- Funeral expenses including grave, monument and burial container
- Child support, spousal support and preferential debts as outlined in the laws of the United States
- Medical cost of deceased’s last illness, additional funeral expenses up to $2,000 and hospital, long-term care or nursing home expenses
- Financial obligations to the state including personal property taxes and work done for the deceased within in a year of their death
- All other claims presented and allowed
According to the Federal Trade Commission, when a will is in place, the executor pays debts from the estate or, if no will exists, a court-appointed administrator takes on the responsibility. Usually, family members are not held liable for the debts of deceased relatives; however, there are a few exceptions as follows:
- When a family member fails to follow laws concerning probate as executor of the estate
- If there are state laws that make certain debts the legal responsibility of the spouse (medical expenses, etc.)
- When survivors and the deceased live in community property states
- Survivors who co-signed for the debt
It is important for businesses to keep in mind that they are obligated to abide by the rule of the Fair Debt Collection Practices Act when seeking payment. This means businesses are not allowed to make threats against the heirs, harass heirs or estate executives, or engage in any unlawful behavior.
