Debts do not go away upon your death. You still have an obligation to pay them. However, some creditors may walk away empty-handed, and it could impact how much your heirs get from your estate if you have a lot of debt.
Maryland law has multiple rules regarding the distribution of assets and payment of debts after your death.
Creditor claims must be timely
Creditors only have six months from the date of your death or two months from the date when your personal representative sends them or publishes a notice to make a claim against your estate for any unpaid debt. If they miss the deadline, they lose their right to make any claims, and they have no legal right to collect any money for debts solely owed by you.
Distribution order of your assets
The law sets the order in which the personal representative will disburse your assets. The first payments must go to the register for administration expenses, funeral expenses and personal representative or attorney compensation.
The remaining assets will go next to pay an allowance to your immediate family. Your spouse will get $10,000 and minor children receive $5,000 each.
If you have money remaining, the first debts paid are any taxes you owe. Next are medical bills you left behind, rent payments up to three months overdue, compensation to anyone who performed services for you in the three months before your death and assistance paid. Only after paying all those claims can your creditors receive any money.
Your creditors receive payment only if money is left in the estate. If it has paid out all assets, then your creditors do not receive payment, but your heirs will also only get the allowance paid. If you can pay all debts and money is left, then heirs receive their inheritance.