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When can a deceased’s debts be negotiated lower?

On Behalf of | Dec 17, 2022 | Probate |

If you are executing someone’s estate after they die, you generally cannot hand out the assets until you have settled the deceased’s debts. Or rather, the debts that are eligible to be covered by the estate, as some debts, such as federal student loans, will die with the person.

First, you need to gather information about the total debts and total assets. Some assets, such as those with beneficiary designations or those moved into a trust, are untouchable by creditors. You need to determine which debts require payment and how much money is in the estate to pay them.

Do not feel guilty about trying to negotiate the debts down

Lenders take a risk when they lend money, whether it is via a loan or a credit card. They know that some people will die before they can pay it all back. The high-interest rates and penalty fees they charge make them a handsome overall profit when you account for their total client base.

You’ll need to show why the estate cannot pay off the debts

If someone dies with a million in the bank, you are probably wasting your time trying to negotiate a $30,000 debt down. If the debt represents a significant chunk of the assets, you can definitely try. 

While some creditors may send debt collectors demanding the whole amount, most do not expect to get it. Make a low offer, then slowly work your way upward to an amount you can both accept. Often creditors are just happy to get something. If you succeed in the negotiations, it means more of the person’s estate will make it into the hands of their beneficiaries, which is typically a good thing. Seek legal help to understand how much you should offer.