Debt offset

Dear Atty. Kathy,

My friend’s mother passed away. My friend told me that after her mother’s death, she was surprised to find out that the savings account of her mother was almost zero balance because the bank offset her mother’s debts with the savings account. When my friend asked the bank, it said that there is an agreement allowing the offset of debts with the savings account due to default since her mother passed away. Can the bank actually do the offsetting? My friend is now lost on what to do especially since her mother had other debts to be settled, too.

Shiloh

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Dear Shiloh,

According to the Rules of Court (Rule 86), a creditor is required to file its claims before the probate court, as follows:

Sec. 5 Claims which must be filed under the notice. If not filed, barred; exceptions. — All claims for money against the decedent, arising from contract, express or implied, whether the same be due, not due, or contingent, all claims for funeral expenses and expenses for the last sickness of the decedent, and judgment for money against the decedent, must be filed within the time limited in the notice; otherwise they are barred forever, except that they may be set forth as counterclaims in any action that the executor or administrator may bring against the claimants.

Where an executor or administrator commences an action, or prosecutes an action already commenced by the deceased in his lifetime, the debtor may set forth by answer the claims he has against the decedent, instead of presenting them independently to the court as herein provided, and mutual claims may be set off against each other in such action; and if final judgment is rendered in favor of the defendant, the amount so determined shall be considered the true balance against the estate, as though the claim had been presented directly before the court in the administration proceedings.

Claims not yet due, or contingent, may be approved at their present value.

From what you narrated, it appears that the bank deducted your friend’s mother’s debts directly from her savings account. If indeed this is what happened, the bank may have bypassed the legal process for settling claims against a deceased person’s estate.

Under the law and jurisprudence, the bank cannot just go ahead and take money from the estate to pay its own claim ahead of everyone else.

Even if your friend’s mother’s loans with the bank became due when she passed away, the bank must still comply with the proper legal process for making claims against the estate.

(Union Bank of the Philippines vs Bernardina Arroyo Tantoco and Alicia Rita M. Arroyo, G.R. No E-02776, 7 July 2026)

Atty. Kathy Larios