What if a estate is insolvent?

Answer 1

An estate is insolvent if it does not have enough money in it or available to it to pay all of its funeral expenses, administration costs and debts of the decedent. All states have statutes that dictate what happens in such estates, so the particular state's laws must be consulted. In general however, most state laws create categories of debts and assign them priorities in payment. Commonly the hierarchy of priority would be something like this: 1. Funeral expenses 2. Administration expenses 3. Taxes owed by decedent 4. Medical expenses of the last illness. 5. Judgment debts 6. All other debts The various debts that have to be paid are put into their proper category and, beginning with the highest priority, all debts of each category must be paid in full before any debt of the next lower category may be paid. When the estate reaches a category where there is not enough money to pay all the claims in that category , then the money that is left is paid to the creditors on a pro rata basis. If lower categories of debts still remain, they will go unpaid. It is important to check the specific laws of the state where the estate is governed to get the specifics.