But as companies try to maximize recoveries and learn more about their legal rights, many are choosing another option: filing actions to recover in probate court.
"When it comes to secured creditors, it makes no difference at all [legally] that the person is dead," says Scott Weltman, of the Cleveland creditors' rights law firm of Weltman, Weinberg & Reis, which also has offices in Columbus, Cincinnati and Pittsburgh. "I would say that in the majority of cases filed, the creditors get 100 cents on the dollar." Under probate law, secured creditors are first in line, followed by unsecured creditors. Heirs get whatever is left over.
But the process typically does take time. In Ohio, the statutory filing deadline in probate cases is one year from the date of death, so it generally takes creditors at least that long to get paid.
Professionals concede that it probably isn't worth one's time to pursue a legal claim unless the debt is at least $500, and you can expect to pay the lawyers anywhere from one-quarter to one-third of the amount recovered. And if the debtor did some estate planning, chances are most of his or her affairs are out of reach of probate anyway.