Can Creditors Attach a Lien to a Property That Is Willed to Children?

Debts are persistent. They don't just go away when you die. They hang around a while to see if they can find a new home -- specifically, in your estate. Credit laws allow creditors to collect debts from most parts of your estate. In some states, they can force payment from a home, both before and after death.

Debts Don't Die

A debt has a life of its own, determined in part by state law. It follows a borrower's assets, not the borrower himself. Debts do not transfer to heirs but do stay with the borrower's estate until the estate is closed and the property transfers to the heirs.

Probate Court

Probate is the process an estate goes through after someone dies. It occurs in court, specifically called probate court. Debts love probate court. Its where they go to get collected after the death of the borrower. Part of the duty of the probate court is to advertise the settlement of the estate to creditors. There they provide documentation of the debt, and the court uses estate proceeds, including the sale of assets like property, to repay the debts before the estate property is transferred to heirs. Once the probate process is complete, the debts are expunged once and for all, whether they have been repaid or not.

Exemptions

What estate assets are exempt from debt collection are determined by state law. All life insurance is exempt, unless it is payable to an estate or trust. Some states place exemptions on portions of an estate. Minnesota, for example, exempts one house, a vehicle and up to $10,000 in personal belongings. Other states have no exemptions. Check your state's credit-collecting law to find out if a creditor has a right to collect its debt from a property.

If They Can Collect

If a debt collector is allowed to collect a debt from property during a borrower's lifetime, it would do so by placing a lien on the property. If a debt collector is allowed to collect a debt from property after a borrower's death, it would generally do it through probate court and not a lien, although it might start with a lien just to protect its interests. The probate court might force the sale of the property to repay the debt but might also use other assets from the estate. In any case, the debt is collected not just from one source but from the entire estate so that the assets left to all heirs is equally reduced by the debt.