A Quora user asks: What happens to debt upon the death of a debtor?
Victor Fong, Licensed Insolvency Trustee in Toronto, Canada answers:
I’m going to answer from a Canadian perspective. However, I think the answer would apply in most common-law countries.
If there are assets in the deceased person’s estate upon his death, the Executor is required to liquidate the assets and use the proceeds to pay off the debt.
If there are insufficient assets to pay off all the debts, then the estate is insolvent and can file for bankruptcy. The Executor would retain a Licensed Insolvency Trustee who would agree to administer the bankruptcy of the deceased’s estate. The Executor would also retain a bankruptcy lawyer who would apply to bankruptcy court for an Order permitting the Executor to assign the deceased’s estate into bankruptcy.
Upon the bankruptcy being filed, the Executor will need to assist the Licensed Insolvency Trustee in identifying and liquidating any assets the debtor may have had. If there are no assets, then the Executor will need to make arrangements to pay the Trustee his fees.