As a financial company owner, it’s difficult to imagine anything more delicate asking about unpaid debt to someone when they died. But because it is an awkward situation, it doesn’t mean you can keep away from it. So, the question is, what happens to someone’s debt after they die? The answer is, it depends.
If someone dies owing you money, generally speaking, their city or state is responsible for clearing any unpaid debts. Mostly, no one is legally responsible for repaying the debt of a deceased person, but of course, there are exceptions to the rule. For instance, if the loan has a co-signer, or perhaps, a joint account holder, in some cases a spouse or the partner may be obligated for those unpaid debts. Keep in mind that laws may vary depending on the state, given that this is a sensitive situation, hiring a professional and well-experienced Debt Collection Agency is a must in this kind of situation.
They will be the ones who will look into your money owed by a deceased person, especially if you don’t want to be the individual who calls a grieving family asking about unpaid debts. It’s too awkward.
If the owner of the business is deceased, this is more sensitive and complicated compared to the usual case. Depending on the type of company, there are some possible situations regarding this.
If the owner of a single proprietorship business dies, the company will be claimed to the owner’s heirs (if any) or the estate. If the heirs don’t want to own the business, the estate will liquidate the assets of the company to clear any debts, and anything that left or remains will be distributed depending on the owner’s will.
If the proceeds are not enough to clear all the debts, then, the remaining business debts are to be cleared by any remaining assets in the estate. Any lawyers or executor must be aware of the business debt that owes you. That’s why invoicing is crucial for this kind of situation.
Partnership, Limited Liability Partnership, or Limited Partnership
If one of the owners dies in a partnership business, the business will remain stable. Though, it depends on their partnership contract. An agreement or contract may provide for the purchase of the deceased partner’s interest and to make sure that the business will continue to move forward. In this kind of case, your business with the debtor may continue as usual without disruption.
But you as the creditor, there’s a possibility that you didn’t know what type of business your client has. And this is the main reason why a comprehensive credit application is needed and essential. It includes the person’s contact information, such as phone numbers, email, address, physical store’s address, and contact information for various people connected with them.
Also, it is essential that when someone who owes you money died suddenly, you must have other people you can talk about the unpaid debt. Though it is uncomfortable and awkward, it is needed to be done shortly after the death of that person. And when the company is dissolved before clearing the debt, then it’ll become more difficult to retrieve your money.