Foreclosures + bank + estate + being served

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Lash444

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Sep 17, 2002
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I know what will be said: Get a lawyer.

But take this scenario: (This is all a hypothetical situation:)


Person dies. You are a benefactor to their estate. Executor has a lawyer who represents them. A bank starts serving all the potential benefactors with papers saying they are being sued for a foreclosed home that the deceased person may have at one point owned. What if the executor did not attempt to pay off the debts from the estate if they were in fact valid? Assume no money has been dispersed as of yet.

What reason would the executor have for everyone to join with their lawyer to fight the banks claim.?.? ". You know the lawyer is really only there to represent the executor. Obviously any beneficiaries portion of the estate is at risk from a potential lawsuit brought by the bank.

But my main question is... Would this be because the executor and their attorney screwed up? Do you side with the executor's attorney and let him go about fixing this mess, or do you try to get your own council? Why would the executor necessarily want you to work with their attorney on this issue?

Clearly everyone on here will say "just get a lawyer". But what if your portion of the estate isn't enough to recoup lawyer fees? The bank wouldn't know that, but you are still being served. At the same time, you don't know what the lawyer is really trying to do, or if now you are being served+screwed because of their actions. Any advice?
 

NetWareHead

THAT guy
Aug 10, 2002
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The bank won't sue you. They will go after the estate of the deceased. Anything left will be disbursed to the inheritors.
 

Lash444

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But the executor is asking you to get with their attorney. Why would the executor ask you to do that? What would their angle possibly be?
 

NetWareHead

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Aug 10, 2002
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But the executor is asking you to get with their attorney. Why would the executor ask you to do that? What would their angle possibly be?

This makes no sense. The estate is the one being sued. However many people stand to inherit from the estate is of no concern here. The estate is its own legal entity with its own legal battle to fight now with the bank.

Maybe the estate is asking for legal help to fight the bank. In any event, a person receiving an inheritance is not liable for debts incurred by the deceased.
 

Lash444

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Sep 17, 2002
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This makes no sense. The estate is the one being sued. However many people stand to inherit from the estate is of no concern here. The estate is its own legal entity with its own legal battle to fight now with the bank.

Maybe the estate is asking for legal help to fight the bank. In any event, a person receiving an inheritance is not liable for debts incurred by the deceased.

That sounds good, but the only reason I can assume that individuals would be served, is because it appears to the bank that the estate was dispersed. Otherwise I would agree that they would go after the estate. Cause I see no reason they would individually serve members unless they thought they could no longer go after the estate to collect a debt.

Does that make sense? In a situation where assets are divided because things do not go through probate, individuals can be sued, right? I can't think of a reason a bank would do that otherwise.
 

kranky

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Oct 9, 1999
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If the home was owned by the decedent, then the estate and ONLY the estate is responsible for unpaid debt. You can't inherit debt. The estate (via the executor) pays the outstanding debts, and the remainder if any goes to the beneficiaries.

What I would do is ask the executor to explain what is happening and make sure there is a clear explanation why the beneficiaries are being involved at all. I suspect the bank is trying to make sure their claim gets paid first before the estate is distributed.

The executor would be a fool to distribute the estate before outstanding debt is paid, as the executor could be personally liable for the mistake. That's why executors get a lawyer to assist in the settlement process - to make sure there are no mistakes.

If for whatever reason you don't get a satisfactory explanation from the executor, you always have the option of disclaiming any inheritance and wash your hands of the entire situation.
 

NetWareHead

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Aug 10, 2002
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That sounds good, but the only reason I can assume that individuals would be served, is because it appears to the bank that the estate was dispersed. Otherwise I would agree that they would go after the estate. Cause I see no reason they would individually serve members unless they thought they could no longer go after the estate to collect a debt.

Does that make sense? In a situation where assets are divided because things do not go through probate, individuals can be sued, right? I can't think of a reason a bank would do that otherwise.

I'm not a lawyer and have no experience with probate court. But I would imagine that while the assets are frozen and being examined by a probate court, this is the chance for creditors to collect a debt from the deceased. I would think that the court would not allow disbursement of assets until all claims have been reviewed.

Even if you received assets, you are still not liable for the deceased's debts.
 

CPA

Elite Member
Nov 19, 2001
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What state is this? I know in Oklahoma they have some strange laws regarding estates.
 

Scotteq

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Apr 10, 2008
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But the executor is asking you to get with their attorney. Why would the executor ask you to do that? What would their angle possibly be?


Perhaps they did the math, and in order to satisfy the creditors changes would have to be made to the amounts disbursed. Hell, maybe even no remainder to be disbursed at all.

In that case, it would make sense to run through everything with the stakeholders up front rather than deal with someone contesting later.
 

Wreckem

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Sep 23, 2006
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No on can really answer your hypo because each state has slight variations in their laws, and there frankly isn't enough information in the hypo to determine. To start,

Is the real property being foreclosed on or is the bank trying to get a deficiency judgement that existed prior to the death of the decedent?
 
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kranky

Elite Member
Oct 9, 1999
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I would think that the court would not allow disbursement of assets until all claims have been reviewed.

Once the executor takes control of the assets, he/she does not need court approval to make disbursements.

In some cases it's not even a problem. If the executor has learned for a fact that the estate contains many times more assets than there are outstanding debt, the executor often makes an partial disbursement to the beneficiaries pending final accounting. That tends to make the beneficiaries less likely to harass the executor for their money and gives the executor time to do everything without people breathing down his/her neck.

But there are executors who believe they can beat the system by giving the money away quickly and pleading there are (and never were) any assets to pay creditors. That's a huge mistake.
 
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