What a Creditor Can Do After the Death of a Company or Business Owner

It is not uncommon for questions to arise after the death of a company or business owner regarding who will settle obligations or to whom obligations will be settled, depending on whether they were a creditor or a debtor. This seemingly simple question can lead to numerous mistakes in practice, and if, for example, payment is made to the wrong person, it does not prevent the rightful creditor from coming forward with their claim, which can ultimately lead to something being paid twice. Indeed, legal certainty requires that all obligations are settled properly (both monetary and non-monetary), which includes timeliness and quality of settlement, as well as ensuring that payment is made to the correct creditor. All of this becomes further complicated in the event of the death of one or both parties in a business relationship. Therefore, it is useful to point out key issues that must be addressed to avoid unnecessary problems. In this regard, the value of the claim is not decisive; the key principle is one that does not tolerate mistakes, and when respected, we will be equally careful and successful whether dealing with tens or millions of kuna.

Transfer of Claims

The first possible contentious situation is one in which there is no creditor because they have died, and someone comes forward demanding that their debt be settled. There are at least two different situations here. The first is one in which the deceased assigned their claim to someone during their lifetime (which then means that their heirs have nothing to do with it as it did not enter the estate), but the debtor was not informed about this (as the debtor’s consent is not a condition). Although the law does not prescribe a written form or the involvement of, for example, a notary for the validity of the assignment of claims, it would be very imprudent to accept ‘on word’ that the assignment occurred and proceed with fulfillment, at least until the heirs expressly agree to it. If there is a written form that does not give rise to doubt (there would be a reason for doubt if there is no original but only a copy, for example), the maximum effort that would be worth making is to inform the heirs of the existence of that claim and leave them a short deadline to either contest or acknowledge the assignment. The second situation is one in which the heirs come forward, and this is truly the easiest as they should be directed to bring (but certainly legally valid, i.e., a decision against which there were either no appeals or any that were made were rejected, and it was certainly delivered to all who need to be notified, thus binding them all) a decision on inheritance from which it will be evident that one of them inherited that claim (this means that a partial decision is also acceptable, as the heirs may dispute something with a third party, and this is undisputed).

Certified Power of Attorney

A specific and quite rare situation is if someone legitimizes themselves through a power of attorney that is valid even in the case of death, which the law allows. It is not the same who legitimizes themselves, and it should generally be trusted that a lawyer who deals with this professionally or a notary or the sole heir (although this is never completely certain, it could be, for example, the only child in a situation without either a marital or extramarital spouse, but then a testamentary heir appears, for example), but this is still only a general recommendation, and ideally, the power of attorney should have such wording (most often it will simply be the words ‘This power of attorney is valid according to the law and mortis causa.’) certified. Finally, attention should also be paid to interest. When the obligation is not in question, the debtor will be safest if they open a court or notary deposit and ‘keep’ the money there, thus protecting themselves from interest costs.

Avoidance and Guarantor

If the situation is reversed, that is, if the deceased was the debtor, great care must be taken to ensure that a claim (judicial or extrajudicial) is not made against the wrong person, which is often not easy. In that case, not only will time and money be wasted on a lawsuit that is lost, but there is also a significant risk that during that time the claim will fall under the statute of limitations, which means that it is not worth pursuing a new lawsuit against the real debtor as it is illusory to hope that a statute of limitations objection will not be raised. The rightful person is generally only the one who legitimizes themselves with a legally valid inheritance decision, with the addition that they inherited at least as much as the deceased owed (because according to the law, heirs are only liable up to the amount inherited, not more than that), and the real problem is that very often, contrary to business ethics and general morality, as well as good customs, heirs will avoid contact with the creditor, let alone cooperation. In the case of larger values, it will be justified to engage in a real detective job and investigate whether the property is ‘hidden’ (this will often be the case with real estate through fictitious contracts that then need to be contested, which is a difficult and uncertain, but also expensive task) or not. All of this is much simpler if the deceased had a guarantor, as then all these problems fall on the guarantor to realize their recourse claim.