What happens if an estate cannot pay its debts?

If an estate in South Carolina cannot pay its debts, the executor or the personal representative of the estate is responsible for managing the estate assets to pay creditors. If there are enough assets to pay the estate debts, the executor will use the assets to pay all creditors before distributing any remaining assets to beneficiaries. If the funds are insufficient to cover all the debts, the executor will distribute the funds from the estate among the creditors according to the priority of claims. The first creditors to be paid are those with secured claims against the estate, such as mortgage lenders or banks with liens on property. The next creditors are those with priority claims, such as unpaid taxes or court-awarded judgments. General unsecured creditors, such as credit card companies, come last. If there are any funds remaining after paying these creditors, they are distributed to the beneficiaries of the estate. If there are not enough funds to pay the creditors, the executor must still manage the assets to the best of their ability to pay the creditors as much as possible. But it is important to remember that heirs and beneficiaries of the estate are not personally responsible to creditors for any of the debts of the estate, even if the estate cannot pay them.

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What happens if an estate cannot pay its debts?

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