Most people facing this question have just opened a stack of mail: a credit card statement, a hospital bill, a mortgage notice, maybe a collector's phone call. They may be the adult child named in a will, the surviving spouse, or the person a trust names to take over. Relatives may be asking when they will receive their share. This page explains how California handles an estate's debts, in order, so the person doing the work knows what comes before any distribution.
What Happens to Debt When Someone Dies in California
Debt survives the death, but it attaches to the estate. The estate is the property the person owned when they died, and creditors are paid from it before anything goes to the family.
The person who pays those debts in a probate case is the personal representative, the person the court appoints to represent the estate. The California Courts guide to property after someone dies explains that the personal representative collects the property, pays the bills, and distributes what remains to heirs or beneficiaries. An executor is the person named in the will to take charge. An administrator is the person the court appoints when no executor serves. An heir inherits under the law; a beneficiary is named in a will, a trust, or an account.
Some estates pass through a trust instead of probate. There, a successor trustee, the person the trust names to take over, administers the trust outside court. When a revocable trust becomes irrevocable at a death, Probate Code section 16061.7 requires the trustee to serve a notification on beneficiaries and heirs. Whether the estate goes through probate or a trust, creditors come before distributions. The California Estate Settlement Guide walks through both paths.
How Creditors Are Notified: The Notice Requirements
Probate Code section 9050 sets the personal representative's duty to notify creditors. It provides that the personal representative "shall give notice of administration of the estate to the known or reasonably ascertainable creditors of the decedent." A creditor counts as known if the personal representative is aware the creditor has demanded payment from the decedent or the estate. That mailed notice is in addition to a published one. The California Courts overview of formal probate says notice must be published in a newspaper of general circulation in the city where the person who died lived.
For the family, notice starts a clock. Under Probate Code section 9100, a creditor must file a claim before the later of four months after letters are first issued to a general personal representative, or 60 days after notice of administration is mailed or personally delivered to that creditor. Letters are the court's document confirming the personal representative's authority. A creditor who misses the claim period generally loses the right to be paid from the estate, though the details depend on the claim and the dates.
One creditor deserves early attention. The Judicial Council's form DE-147, Duties and Liabilities of Personal Representative, states that if the decedent received Medi-Cal assistance, the personal representative must notify the State Director of Health Services within 90 days after appointment. The same form says notice of administration goes to each known creditor within four months after appointment.
The Order in Which Debts Are Paid
California does not let the loudest creditor go first. Probate Code section 11420 sets the order of priority among classes of debts:
- Expenses of administration.
- Obligations secured by a mortgage, deed of trust, or other lien, so far as they may be paid from the proceeds of the property subject to the lien.
- Funeral expenses.
- Expenses of last illness.
- Family allowance.
- Wage claims.
- General debts, including judgments not secured by a lien and all other debts not in a prior class.
The statute adds an exception at the top: debts owed to the United States or to California that have preference under federal or state law receive that preference. Expenses of administration include the costs the California Courts overview describes, such as court filing fees, newspaper publication, the probate referee's valuation, and fees paid to the personal representative and any attorney. If a secured property's sale proceeds fall short, the unpaid part joins the general debts.
Credit cards, most medical bills, and personal loans usually sit in the last class. Section 11420 also says no debt of any class may be paid until all prior classes are paid in full, and debts within a class share proportionately if money runs short. Distributions to heirs come only after debts are properly addressed. DE-147 warns that a personal representative who acts without required court permission may be removed, may have to reimburse the estate personally, or both.
Secured Debts: Mortgages and Liens on Real Property
A mortgage or deed of trust is a lien on real property, meaning the land and buildings. The lender's security interest stays on the house after the borrower dies. If payments stop, the lender can generally pursue foreclosure under the loan's terms, so someone usually keeps the loan current while the estate is settled.
Many families worry that the lender will demand the full balance immediately. Federal law limits that. Under 12 U.S.C. § 1701j-3(d), for a loan on residential real property with fewer than five dwelling units, a lender may not exercise a due-on-sale clause, a loan term allowing the lender to call the whole loan due on a transfer, upon a transfer to a relative resulting from the borrower's death, a transfer on the death of a joint tenant, or a transfer where the borrower's spouse or children become an owner. The list in that subsection continues with other transfers. That protection concerns calling the loan due; it does not excuse missed payments.
An heir who inherits a mortgaged house usually faces a few categories of options: keep it and continue, assume, or refinance the loan; sell it and pay off the mortgage from the proceeds; or let the lender proceed. Each carries tradeoffs that depend on the house, the loan, and the co-heirs. Personal property, such as vehicles, bank accounts, and belongings, follows different rules, and a car loan is a separate debt. What to do when you inherit a house and keep, rent, or sell decisions explain the choices further.
Do Heirs Inherit Debt? What Family Members Are and Are Not Responsible For
Children generally do not inherit a parent's debt. Being an heir or a beneficiary does not make someone personally liable; the debt belongs to the estate, and it is paid from the estate's property.
There are exceptions. A co-signer on a loan agreed to the debt personally, so that obligation does not depend on the estate. A surviving spouse can also carry liability in one situation the code spells out. Under Probate Code section 13550, when a married person dies, the surviving spouse is personally liable for the deceased spouse's debts chargeable against certain property passing to the surviving spouse, to the extent the law provides and subject to exceptions listed in that section. Whether it applies depends on how property passed and which debts are involved.
Timing matters too. An heir who receives property before debts are paid may face a demand to give back value received if valid claims go unpaid. For the family member fielding calls, a creditor contacting a relative is not the same as that relative owing the debt. A collector can ask; legal liability depends on the facts above.
When the Estate Cannot Pay All Its Debts: Insolvent Estates
An insolvent estate is one whose debts are larger than the property available to pay them. Discovering this can feel like failure for the person in charge, but it is a common situation the law anticipates.
The priority order in section 11420 still governs. Each class is paid in full before the next receives anything, and when the money runs out partway through a class, those creditors share proportionately. Lower classes, often the general debts, may receive part of what they are owed or nothing. Heirs and beneficiaries receive nothing until valid, timely claims are satisfied.
The personal representative does not become personally responsible for the decedent's debts simply because the estate is short. Personal exposure comes from how the job is done, such as paying a lower class before a higher one or distributing to family too early. When an estate is clearly insolvent, a probate attorney can review the claims and the order of payment before any money moves.
Small Estates and Simplified Procedures: How Debt Rules Apply
California offers simpler routes for some estates: the affidavit for collection or transfer of personal property, the petition to determine succession to the decedent's primary residence, the affidavit for real property of small value, and the spousal or domestic partner property petition. The Judicial Council's DE-221 Spousal or Domestic Partner Property Petition asks the court to find that administration is not necessary, as Probate Code section 13650 allows.
Each procedure has a value limit adjusted over time. Probate Code section 13100 states the limit for the personal property affidavit and allows its use only after 40 days have passed since the death; the California Courts publish the current figures and forms on their self-help pages. Probate Code section 13050 excludes some property from that count, including joint tenancy property, property in a revocable trust, and multiple-party accounts that belong to a surviving party or payee.
A simplified procedure does not cancel the debts. The person who collects property under an affidavit generally remains answerable for the decedent's valid debts, up to what was received. A disputed debt or an estate that cannot pay its bills may lead a family to consider formal probate, with its creditor notice and claim period, even when the value would qualify.
What the Personal Representative Should Do First
The first weeks are about information and records, not payments. For someone doing this job for the first time, a short sequence helps:
- List every known debt. Credit cards, medical bills, mortgages, car loans, taxes, and any Medi-Cal claim all go on one list before any distribution.
- Open an estate account. DE-147 states the account name must show it is an estate account and estate funds must never be mixed with personal funds.
- Hold payments until the order is clear. Paying a general debt early can leave too little for a higher class under section 11420.
- Record every transaction. Each payment in or out becomes part of the reports the court reviews.
A probate attorney can explain the claim process and payment order for a particular estate, and a CPA or enrolled agent can handle the decedent's final income tax return and any estate income tax return. The estate settlement checklist lays out the larger sequence of tasks.
