A house can be one of the most valuable assets a person owns. But what happens to it if they still owe money on it when they die? What happens if a house goes into foreclosure during probate? There are ways to delay foreclosure, usually requiring a promise to pay outstanding amounts owed. The lender may successfully foreclose if you make no plan or payments.
If you are considering making an estate plan or need to probate a loved one’s estate, contact Robbins Estate Law today. Our firm has been serving the greater Austin area for years. We have been passionate about estate law since our founders met in law school, and we have the knowledge and experience to guide you.
The Texas Probate Timeline
When someone dies, their loved ones generally probate their estate to distribute their assets. Several estate administration options exist depending on the size of the estate, any debts left by the decedent (deceased person), and whether the decedent left a will.
Administration Options
You can administer a Texas estate through:
- Independent administration: completing the probate process with little court oversight
- Dependent administration: completing the probate process with active court oversight. Dependent administration typically takes the longest to resolve
- Muniment of Title: avoiding administration if the decedent left no debt
- A small estate affidavit: avoiding administration if the estate is valued at $75,000 or less, the decedent died without a will, and estate debts are not higher than assets
Opening the Estate
Regardless of which option you use, someone needs to start probate within four years of the decedent’s death. It does not happen automatically.
If the decedent left a will, the will may name an executor to manage the estate. Usually, the executor should bring the will to court to begin the probate process.
If the will does not name an executor or the executor cannot or will not serve, the court typically appoints an administrator. Usually, the administrator is an interested party—creditors and people who are or might be entitled to inherit from the estate.
Interested parties can also jointly select an administrator. If they disagree, most—including creditors—can apply for a court appointment.
Administering the Estate
The executor or administrator is the estate’s personal representative. The representative handles:
- Identifying legal heirs
- Notifying interested parties about the proceeding
- Responding to creditor’s claims
- Distributing assets
As an estate fiduciary, the representative must act in its best interests. Once the representative completes their duties, they close the estate.
Foreclosure on a Probate Asset
So, you have up to four years to begin the probate process. However, lenders can usually start foreclosure proceedings 120 days after payments become overdue.
What Happens If a House Goes into Foreclosure Before Probate Begins?
A lender may find it worthwhile to manage the probate process, particularly when the estate appears minimally complicated, and apply to be appointed administrator. Another interested person can prevent the lender from being appointed by:
- Paying the claim,
- Proving to the court that the claim is legally unenforceable, or
- Paying a bond equal to twice the amount of the claim.
Even if not appointed as administrator, the lender has the right to foreclose on the house without probate. When a lender initiates foreclosure proceedings, you can typically delay the proceedings by starting probate. Then, you have up to six months to catch up on missed payments and make a plan. If you cannot open probate soon enough, you can request a court temporarily prohibit the lender from collecting on the debt while you work to start probate.
What Happens If a House Goes into Foreclosure During Probate?
During probate, the estate’s representative notifies creditors about the proceedings. Then, the lender and representative can decide how the loan will work during probate, including how the loan will be paid.
If the representative does not pay, the lender may begin foreclosure. When the lender starts foreclosure proceedings during probate, the surest way to prevent foreclosure is to pay off the loan or, at least, the outstanding bills.
Depending on what assets the estate includes and how those assets should be divided, paying the loan out of estate assets may be complicated. If the house holds special value to one or more interested parties, you may find a way to satisfy and redistribute the debt.
Avoiding the Risk of Foreclosure During Probate
Of course, the best way to avoid foreclosure during probate is to prevent it. Open probate promptly. Ensure the estate’s representative is reliable and will keep up with mortgage payments. And consult a lawyer to help you stay on track.
Get Help with Probate-Related Foreclosure
If you need help responding to, preparing for, or working to prevent foreclosure on estate assets, contact us today. Our firm focuses exclusively on estate and probate law, so we can guide you through any estate-related issues.
Resources:
- Texas Estates Code § 205.001, link.
- Texas Estates Code § 257.001, link.
- Texas Estates Code § 301.002, link.
- Texas Law Help, Foreclosure Fact Sheet, link.
Kyle Robbins
Kyle Robbins is the founder and sole owner of The Law
Offices of Kyle Robbins. He received his J.D. with honors from the University of Texas School of Law and his B.S. in Food Chemistry and Microbiology from Oklahoma State University.
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