This is an uncomfortable but frequent scenario: Someone dies, and there are simply not enough assets in the estate to pay all the creditors, never mind distribute anything to the heirs. There are clear laws covering this situation.
Bills of insufficient estates are paid in this order:
1. Costs and expenses of administration (the probate process itself).
2. Reasonable funeral expenses.
3. Debts and taxes with preference under federal law (ex. federal taxes owed).
4. Reasonable and necessary medical and hospital expenses of the last illness.
5. Debts and taxes with preference under other laws of the Commonwealth (ex. state income taxes, any creditor who has perfected their claim*).
6. Debts due to MassHealth (MassHealth will send a bill to the estate).
7. All other claims (ex. credit cards).
* To bump up to Number 5, a creditor must follow a court process to properly file a claim. Merely sending you a bill is not enough; that puts them at #7.
You may be asking whether, in the case of small estates where the family will end up with nothing, is it OK to simply walk away from an estate? To not open a probate at all? Quite often (but not always!), the answer is yes. Abandoned bank accounts eventually go to the Commonwealth’s general budget.
If you are working with a probate attorney, she will guide you through these decisions. If you are handling probate on your own, tread carefully.