Does your business have delinquent accounts and you would like to improve your collections?
Are you a collections agency or law firm with debt portfolio looking to get a better return?
If you answered "Yes" to either question, then read on...
Probate- or Estate-Collections is one of the most effective ways to collect on delinquent accounts of deceased debtors.
What is Probate- or Estate-Collections?
When a consumer debtor dies, claims against the deceased debtor are mostly governed by the probate/estate laws. Probate courts with relevant jurisdiction (mostly based on deceased's last residence or location of primary assets) administer the estates. The laws are geared for expedient resolution of creditor claims and issues so that the estate can be administered efficiently.
Probate collections will continue to play an increasingly important role in debt collections for two main reasons:
Inverse Growth: Population over 65 years of age between now and 2060 will almost double while the percentage of younger population will decrease.
Increasing Debt: Continued increase in senior households with debt.
INVERSE GROWTH: Demographic changes impacting debt collections
Currently, middle-aged population, between the ages of 35 and 64 years, holds the highest average debt in the US (Source: Federal Reserve Bulletin, Sep 2017). However, the middle-aged population is projected to shrink in size from 25.8% to 24.7% between 2016 and 2060. In the same period, the senior population, 65 years and older, is the only segment growing and is projected to almost double in size from about 49 million to over 95 million.
For the first time in US history, adults 65 and over, are expected to outnumber children by 2035. By 2030, people 65 and older, are estimated to be over 20% of the total US population (Source: National Census Bureau).
INCREASING DEBT: Average debt held by seniors continues to increase
People, 55 and older, are continuing to accumulate more debt. According to the Employee Benefit Research Institute, families with the oldest head-of-household are seeing the greatest increase. According to TransUnion, US consumers, 60 years and older, owed $615 billion of debt (credit cards, student loans, auto loans & personal loans) in 2017, a whopping 84% increase since 2010 and the most increase than any other age group.
The average total debt owed by the 60 - 69 age segment (who owed student loans) increased from $23K in 2010 to almost $34K in 2016 (WSJ, Feb 2, 2019). For the 70 and older segment, the number jumped from $21K in 2010 to $27K in 2016.
Probate collections is very effective. But how do you go about it?
Broadly speaking, there are 3 steps:
Step 1: Identify deceased debtors in your debt portfolio (or delinquent accounts)
Step 2: Locate the estate (including details such as when it was filed, which county/court, file or case number, etc.) if filed
Step 3: File the relevant paperwork with the appropriate court in a timely manner
Step 1: Identify deceased debtors in your debt portfolio
There are several ways to figure out which of your debtors are deceased. If your portfolio is small (# of delinquent accounts), calling the last known contact number may get you to the deceased's family. For bigger portfolios, there are several online tools and skip-tracing companies that provide this service for a fee.
Step 2: Locate the estate
If your business has customers in just one or a few geographic areas, the task of locating the estate, if filed, is easy. Usually, you can go to the local County Court (or the Court that handles probate matters in your county/ jurisdiction) and look up Court Records to obtain the necessary information.
If your business spans larger geographic area covering multiple counties and states, the task starts becoming confusing and complex. This is because, laws vary widely on how the information can be accessed. Some courts require you to be physically present at the court to search their records while others make all this information available online with easy search tools.
It is very important to file your claims in a timely manner as the clock starts counting down, once an estate is filed in the name of the deceased debtor. Most courts have firm deadlines varying from a few months to a couple of years.
If you have delinquent accounts that are more than a few, and across multiple counties/states, it is better to seek the experts. Tens of thousands of estates are filed every year. These estates are filed in over 3,200 probate courts all over the country. Each court has unique rules and methods for accessing estate filing data. Estates are sometimes filed at the place of death and sometimes where the assets are located. Some collections agencies and law firms who specialize in probate/estate collections perform both step 2 and step 3.
Step 3: File the relevant paperwork with the appropriate court in a timely manner
If you only have a few delinquent accounts of deceased debtors and know the estate information, you can file claims yourself using the guidelines outlined by the court. However, if you have more than a few accounts and the estates are filed in different courts, it is cost-effective to outsource this task to a probate law firm or a probate collections agency.
