Legal Obligations to Creditors of an Estate

Legal Obligations to Creditors of an Estate

When a decedent dies owing money to valid creditors then the law requires that the creditors be paid from the probate assets that are not exempt. Normally, the decedent’s homestead, home furnishings and vehicles are exempt from creditors.

The Personal Representative has an obligation to give notice to “known or reasonably ascertainable” creditors. These can include credit card companies, physicians, hospitals, or service companies. Finding the name and addresses of potential creditors can be a challenge. One way to locate creditors is by examining the decedent’s mail.  Access to electronic bills pose more of a problem.  New laws are expected shortly to deal with electronic information.

Once the name and address of the creditors are found, then the attorney will mail  them a document titled a “Notice to Creditors.” This notice advises the creditor that a probate for the decedent has been opened, provides the name and address of the Court and the file number.

A creditor has thirty days from the date they were served to file a Statement of Claim in the court. If the creditor misses the thirty day deadline and has not been granted an extension by the Court, then the creditor is barred from making the claim. This legal procedure balances the rights of creditors with the rights of the beneficiaries to  expedite the probate process.

The law also requires that the Notice to Creditors be published in a local newspaper. Any creditor who sees this notice has 3 months from the date of publication to file a Statement of Claim.  A creditor who did not get mailed a Notice to Creditors and fails to file A Statement of Claim within the three months is forever barred from making a claim.

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