The debt that someone owes you does not disappear when he or she dies. Instead, you can turn your collection efforts towards the deceased debtor’s estate. Creditors have a deadline to file a claim against a debtor’s estate and collect compensation from the estate before the debtor’s beneficiaries inherit the assets. You may lose your ability to collect your debt if you miss the deadline. You must know who you may contact about the debts, who can be liable for the remaining debts, and how quickly you will need to file a probate claim.

Contact

The representative of the debtor’s estate handles all contact with creditors about claims on the estate. Once you know who the representative is, you are not allowed to contact the debtor’s family members. In many cases, the representative will notify you of your debtor’s passing and your right to file a probate claim against the estate. The representative could also send you a letter to cease contact because there are no assets in debtor’s estate to repay you. After receiving this letter, you are not allowed to contact the representative unless you are filing a lawsuit to dispute the claim of no assets.

Liable Parties

In most situations, personal debt does not transfer to another person when the debtor dies. However, there are exceptions that make family members liable for the debts, including:

Obtaining a judgment order against a debtor gives you the authority to enforce your debt collection. However, your debtor may continue to fight your collection efforts, based on legal technicalities and new claims. Thus, the legal battle against your debtor is not finished until you have received the money you are owed.

Recent Case

In MI Management v. Proteus Holdings, the plaintiff is a creditor who appealed multiple Illinois circuit court decisions that:

• Quashed garnishment orders against a debtor;
• Vacated a third-party citation to discover the debtor’s holdings in a bank; and
• Granted a third-party creditor’s adverse claim to the debtor’s holdings.

In 2014, the plaintiff received a favorable judgment against two individual debtors and their company for breach of a $1.25 million promissory note. The plaintiff issued wage and non-wage garnishment summons against the debtors, who did not respond or appear in court. The court granted conditional garnishment judgment orders, which were later confirmed after the debtors continued to not respond. The plaintiff issued citations to discover assets to the debtors and their bank.

The Illinois Supreme Court has adopted new rules regarding procedures for credit card companies and debt buyers who file lawsuits against debtors. The rules will go into effect on Oct. 1 and will apply to both new cases and active cases that have not reached a judgment. The new rules do not apply to an original creditor that is not a credit card company. The rules create new requirements that are meant to force creditors to be more timely and thorough in filing specified motions in court. There are three notable rule changes:

1. New Affidavit Requirements: A credit card company or debt buyer must use a new affidavit form when filing a complaint against a debtor. A statement must accompany the affidavit that says that the complaint was filed within the statute of limitations. Applicable creditors can modify their existing affidavit to comply with the new rule, as long as it includes the debt contract, relevant information on both parties, and a history of the debt.
2. Same-Day Motions: Credit card companies and debt buyers will need to give prior notice before requesting a continuance or voluntary dismissal of a trial. This means that the court will no longer accept a plaintiff’s written or oral request to end or continue a trial if it is made on the day of the trial. Courts may require that applicable creditors file a motion to dismiss a trial at least five business days before the trial. As for a continuance, the court may accept a same-day request if both parties agree to it and the continuance would serve the interest of justice.
3. Identity Theft Rules: A defendant may claim that he or she is not liable for a debt because he or she was the victim of identity theft. A new rule requires a debtor to file an identity theft affidavit. Once the affidavit is filed, the creditor will have 90 days to either dismiss the lawsuit or contest the affidavit. To contest the identity theft claim, the creditor must submit its own affidavit that gives factual evidence as to why the identity theft claim is false.

Effect on Creditors

The new rules largely favor debtors because they require creditors to make quicker decisions on how to proceed during their cases. Failing to comply with the rules could delay a judgment or lead to a dismissal. A Chicago creditor’s rights attorney at Walinski & Associates, P.C., can help you remain in compliance with court rules and obtain the judgment you need in your case. Schedule a consultation by calling 312-704-0771.

A foreclosure case between a bank mortgagee and borrower made its way to the Illinois Supreme Court earlier this year. In Bank of New York Mellon v. Pacific Realty Group, LLC, the courts had been trying to solve two points of contention:

• Whether service by publication was an adequate means of informing the borrower of a pending foreclosure when the borrower does not have an agent in the state; and
• Whether the 60-day deadline for a borrower to file a motion to quash a foreclosure should have included a period during which the case was inactive.

The supreme court answered the second question in favor of the borrower and sent the case back to the appellate court in order for it to rule on the first question.

Background

When a debtor borrows money from multiple creditors, an intercreditor agreement can be helpful in determining the rights of each creditor. The primary purpose of the agreement is to establish which creditor receives priority in case the borrower defaults on its debts. The higher-priority lender is called the senior creditor, and the other lender is called the junior creditor. In the event of default, the agreement may state that the senior creditor must be repaid in full before the junior creditor can take action on the debt. However, the agreement can also include provisions that will protect the junior creditor in case the senior creditor takes action that impairs the junior creditor's ability to collect on its debt. Depending on the severity of the action, a court can decide to strip the senior creditor of its priority claim on the debt.

Impairment

An intercreditor agreement is based on the junior creditor knowing how much the senior creditor must be repaid before the junior creditor can file a claim on the defaulted debt. Following the agreement, a senior creditor may act on its own to increase the borrower’s debt obligation by: