In most states, outstanding debts are covered by the estate assets during the probate process, or they are written off if an estate is declared insolvent. Maryland handles estate debt in the same manner if the deceased person owned any assets such as a vehicle or real estate.
Probate Process
The probate process is a legal process that involves appointing an official estate administrator to handle legal paperwork, create a list of assets and a list of outstanding creditors, notify all parties of the death, and ensure valid outstanding debts get paid.
Maryland Estates
In Maryland, an estate must be opened in probate court if the deceased person owned any real property such as a motor vehicle or real estate. The type of estate case determines the forms and requirements that apply to the case. If the established value of the person's assets is less than $30,000, a small estate can be filed. If the probate-worthy assets are above $30,000 -- or $50,000 when the spouse is the sole heir -- a regular estate case must be opened.
Assets and Debts
The probate process evaluates all assets and valid debts, then liquidates or sells assets as needed to pay off outstanding debts. Outstanding credit card accounts that are listed on the valid debts of the deceased person will be settled as part of the probate process. Any creditors that feel they have a claim on the estate but are not listed by the executor can fill out the "Claim Against Decedent's Estate" form within six months of the person's death.
Insolvent Estates
When a deceased person does not have any assets that must go through probate court, or the assets are not enough to cover the outstanding debt, the court may rule that the estate is insolvent. When an estate is insolvent, a portion of the debt may be paid from asset liquidation and any left unpayable is written off by the creditor.
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