Brother Died With Debt, But No Assets

Dear Len & Rosie,

My wife’s brother recently died. As nearest kin, she’s handling his affairs and hopes to keep it as simple as possible. Mostly, his affairs are very simple: no spouse, no real estate, and no bank accounts. We have already cleaned out his apartment and directed that his mail be forwarded to us. He owned a new truck, on which more is still owing than we could sell it for. Also, it appears he had a few credit cards with balances owing. Are we responsible for these things? How should we proceed?

Kent

Dear Kent,

No bank accounts in this day and age? That’s unusual but not impossible. We suppose he could have cashed his Social Security check each month at the bank and paid his landlord in cash or with a money order. From what you’re telling us, all he owned on his death was his personal possessions and his automobile, which wasn’t even paid off. It’s obvious that your brother-in-law’s estate is insolvent.  
The automobile loan is secured by a lien on your brother-in-law’s truck. Since the value of the truck dropped by several thousand dollars the moment your brother-in-law drove it off the dealer’s lot, your wife cannot possibly sell the truck for enough money to pay off the loan. Fortunately, she doesn’t have to. All she should do is to contact the lienholder (the bank that gave your brother his loan) and turn the truck over to them. It’s their problem. They’ll just do a repossession and a lien sale.

With respect to your brother-in-law’s other creditors, your wife should send them a death certificate and a letter explaining that her brother died without an estate, that there are no assets to pay them off, and that there will be no probate. Don’t even bother sending original death certificates. A photocopy will do just as well and your wife shouldn’t have to pay for death certificates out of her own pocket. The banks should write off the credit card debt for the simple reason that they can’t squeeze blood out of a turnip.

It is important to know that your wife is not personally responsible for the debts of her brother under any circumstances unless she was a cosigner on his debts. Only the assets owned by your brother-in-law upon his death are subject to the claims of his creditors. The one single exception to this is that her brother’s next of kin are legally responsible for his cremation or burial expenses.

Your wife’s brother was likely on Medi-Cal benefits, if he owned so little. It’s important to notify the Department of Health Care Services of his death, and it’s important to keep his death certificate and any account statements handy so that you can show Medi-Cal there are no assets subject to its estate recovery claim.

That leaves your brother-in-law’s personal property. Technically, his personal possessions are assets of the estate and should be liquidated to raise money to pay off his creditors. But in practice, this never happens unless the personal property is of significant value. Your wife can keep her brother’s belongings for herself, and give what she does not want to charity.

Len & Rosie