Estate Administration: How to Respond to Creditor Claims

Dealing with the probate estate can be a tough job for the personal representative.  Perhaps the biggest reason why the job is so difficult is that the personal representative usually has never done it before.  Furthermore, the personal representative is often a child or spouse of deceased loved one.  Add all that up, and it’s a tough job.

Fortunately for the new or inexperienced personal representative, a good estate administration lawyer will be able to guide them through the process.  One of the most difficult aspects of the estate administration process is dealing with the creditors of the estate.  Quite frankly, the creditors can often be just as new to the probate process as the personal representative.  Yet another reason to talk with a lawyer.

If a person is appointed as a personal representative and probate estate is opened, the personal representative is likely going to deal with creditors and their claims.  The personal representative needs to know how to respond.

Although the laws vary from state-to-state and you should talk with an experienced estate administration lawyer in your state, there are some typical guidelines that can be followed.  For instance, when an estate is opened, the personal representative of the estate must provide notice to any and all known creditors.  Often, the personal representative must do this by publishing notice in a local newspaper that an estate has been opened and any and all creditors have deadlines by which they must file their claims.  If the creditors don’t file claims, the claims are typically disallowed and will no longer be counted as a debt of the estate.

When a creditor does make a claim, the personal representative should talk with his or her attorney right away.  Depending on what state you are in, the creditor(s) must have filed their claims within anywhere from three (3)  to six (6) months of the first publishing of notification to the creditors.  This means that if the newspaper notice is published on November 1 then, in a three (3) months state, the creditor must file their claims with the probate court by February 1 or lose all right to collect the debt.  (As an aside, there are some extemporaneous factors which courts can use to lengthen the creditor claim deadline, but those are rare instances).

Assuming the claim was filed on time, the personal representative has two choices (1) if there are enough estate assets to cover the debt, the personal representative should pay the debt or (2) if there are not enough estate assets, the personal representative must notify to creditor of the deficiency.  There are a host of rules which dictate which creditor gets paid when in an estate.  I will not discuss all of those rules here.  Suffice it to say that it needs to be the subject of another post.

In conclusion, the personal representative has a difficult job.  He or she has a lot of decisions to make that are often new to them.  Giving estate creditors notice and paying estate creditor claims is just one of these jobs.  Again, if you are inexperienced as a personal representative or dealing with estates, your first task should be to contact a licensed Minnesota probate lawyer.