One of the main purposes for probate laws is to provide a means, a procedure, for creditors to be paid, to the extent there are assets, from the estate of deceased obligors. In fact, the legislation was amended not too long ago to include creditors into the definition of persons qualified to apply for the application to probate a decedent’s estate. Today, a creditor has the legal standing to file an application to administer an estate that owes the creditor money. This is a powerful tool for the creditor. The laws provide for strict adherence to the form of presented claims, specific language must be used, the requirement for filing of suit against a rejected claim, which can happen either expressly or impliedly, must occur within a specific period of time or else the claim becomes barred by law.
Rights of creditors
In all states, creditors have a right to make a claim against a probate estate for money that is owed to them by the decedent. And creditors’ claims have a priority over the beneficiaries’ rights to distribution from the estate. The executor must notify all known and reasonably ascertainable creditors of the estate so that these creditors have time to make a claim. The executor does not have to make extensive and expensive searches to find these creditors, but they must notify the ones that a reasonable person would know about (for example, because they have received bills from such creditors). In some states, the executor must also publish a notice of the probate proceeding in a publication in the county where the decedent lived for a certain period of time, often 3 consecutive weeks. Once notice has been received, or published, creditors have a certain period of time to submit a claim against the estate, usually 3-6 months, but this varies by state. If a creditor receives notice and fails to make a claim within the permitted claims period, their claim is barred (they can’t ever collect on that debt). Also, states have another limit on claims against a decedent that is simply a time-barred claim (often 1-2 years). If no claim is made within that statutory time frame, it is also barred.Executors who fail to provide notice to known or ascertainable creditors may be personally liable to the estate for the debt, so it’s an important part of the executor’s job to pay all of the estate’s debts and to provide proper notice to the estate’s creditors.No multiple-party account will be effective against an estate of a deceased party to transfer to a survivor sums needed to pay debts, taxes, and expenses of administration, including statutory allowances to the surviving spouse, minor children and dependent children, if other assets of the estate are insufficient. A surviving party, P.O.D. payee, or beneficiary who receives payment from a multiple-party account after the death of a deceased party shall be liable to account to his personal representative for amounts the decedent owned beneficially immediately before his death to the extent necessary to discharge the claims and charges mentioned above remaining unpaid after application of the decedent’s estate. No proceeding to assert this liability shall be commenced unless the personal representative has received a written demand by a surviving spouse, a creditor, or one acting for a minor or dependent child of the decedent; and no proceeding shall be commenced later than two years following the death of the decedent. Sums recovered by the personal representative shall be administered as part of the decedent’s estate.
This section shall not affect the right of a financial institution to make payment on multiple-party accounts according to the terms thereof or make it liable to the estate of a deceased party unless before payment the institution has been served with process in a proceeding by the personal representative. Generally, an individual’s death does not extinguish creditors’ claims, but creditors must act quickly to assert their claims against an estate to avoid losing their rights forever. Every state has its own laws on probate procedures, including how estate creditors are to be handled. The person who is administering the estate, often called the personal representative, is supposed to notify creditors that the deceased has died so that the creditors can make claims against the estate.It’s fairly easy for a personal representative to identify creditors if the deceased has left paperwork showing the amount of debt, but if creditors make claims that aren’t shown in the deceased papers, things can get more complicated. The personal representative has to be very careful, because he or she might be personally liable if creditors aren’t paid properly or if estate assets are paid out on invalid claims. If the personal representative approves a creditor’s claim, the bill is paid out of the estate assets. If the claim is rejected, creditors may sue the estate to obtain payment, which can cause much delay and expense.The way this notice is given varies from state to state. In Utah, you have a duty to notify both known and reasonably ascertainable creditors of the death of the decedent and that you have been appointed as personal representative. This includes not only creditors with outstanding bills such as doctors, credit card companies and utility companies, but also people who may have a potential claim against the decedent on account of something that happened during the decedent’s lifetime. For example, if the decedent was involved in an auto accident in the year prior to his or her death, or if you learn that someone, even if that person is a relative, may have loaned money to the decedent and may expect to receive payment from the estate, you should notify those persons that probate has begun.
Time for Filing Claims
(a) A creditor shall file a claim before expiration of the later of the following times:
(1) Four months after the date letters are first issued to a general personal representative.
(2) Sixty days after the date notice of administration is mailed or personally delivered to the creditor. Nothing in this paragraph extends the time provided in the Code of Civil Procedure.
(b) A reference in another statute to the time for filing a claim means the time provided in paragraph (1) of subdivision (a).
(c) Nothing in this section shall be interpreted to extend or toll any other statute of limitations or to revive a claim that is barred by any statute of limitations. The reference in this subdivision to a “statute of limitations” includes Section 366.2 of the Code of Civil Procedure. A vacancy in the office of the personal representative that occurs before expiration of the time for filing a claim does not extend the time. A claim that is filed before expiration of the time for filing the claim is timely even if acted on by the personal representative or by the court after expiration of the time for filing claims.
(a) Upon petition by a creditor or the personal representative, the court may allow a claim to be filed after expiration of the time for filing a claim provided in Section 9100 if either of the following conditions is satisfied:
(1) The personal representative failed to send proper and timely notice of administration of the estate to the creditor, and that petition is filed within 60 days after the creditor has actual knowledge of the administration of the estate.
(2) The creditor had no knowledge of the facts reasonably giving rise to the existence of the claim more than 30 days prior to the time for filing a claim as provided in Section 9100, and the petition is filed within 60 days after the creditor has actual knowledge of both of the following:
(A) The existence of the facts reasonably giving rise to the existence of the claim.
(B) The administration of the estate.
(b) Notwithstanding subdivision (a), the court shall not allow a claim to be filed under this section after the court makes an order for final distribution of the estate.
(c) The court may condition the claim on terms that are just and equitable, and may require the appointment or reappointment of a personal representative if necessary. The court may deny the creditor’s petition if a payment to general creditors has been made and it appears that the filing or establishment of the claim would cause or tend to cause unequal treatment among creditors.
(d) Regardless of whether the claim is later established in whole or in part, payments otherwise properly made before a claim is filed under this section are not subject to the claim. Except to the extent provided in Section 9392 and subject to Section 9053, the personal representative or payee is not liable on account of the prior payment. Nothing in this subdivision limits the liability of a person who receives a preliminary distribution of property to restore to the estate an amount sufficient for payment of the distributee’s proper share of the claim, not exceeding the amount distributed.
(e) Notice of hearing on the petition shall be given as provided in Section 1220.
(f) Nothing in this section authorizes allowance or approval of a claim barred by, or extends the time provided in, Section 366.2 of the Code of Civil Procedure.
(a) Subject to subdivision (b), if a claim is filed within the time provided in this chapter, the creditor may later amend or revise the claim. The amendment or revision shall be filed in the same manner as the claim.
(b) An amendment or revision may not be made to increase the amount of the claim after the time for filing a claim has expired. An amendment or revision to specify the amount of a claim that, at the time of filing, was not due, was contingent, or was not yet ascertainable, is not an increase in the amount of the claim within the meaning of this subdivision.
(c) An amendment or revision may not be made for any purpose after the earlier of the following times:
(1) The time the court makes an order for final distribution of the estate.
(2) One year after letters are first issued to a general personal representative. This paragraph does not extend the time provided by Section 366.2 of the Code of Civil Procedure or authorize allowance or approval of a claim barred by that section.
Deadlines for Filing a Creditor’s Claim
What happens when a debtor passes away before the creditor can obtain a judgment and collect? Filing suit within the applicable statute of limitations, and thus preserving the creditor’s claim requires a timely filing of a lawsuit against the appropriate defendant. In a case where the defendant is deceased, doing so requires compliance with statutory procedural requirements.
When the Judgment Debtor Dies
If the judgment debtor dies prior to satisfaction of the judgment debt, the probate code becomes the governing code for enforcement of the judgment debt. The statute of limitations for filing a claim against an estate is a strict one year from the date of the debtor’s death. This limitation period applies regardless of whether the judgment creditor knew the judgment debtor had died! The only exception to this absolute bar is when equitable estoppel (or a specific statute) applies.
Creditor’s Timeline for Filing a Claim
The second important deadline is the filing of the creditor’s claim. A creditor only has four (4) months from the date an executor or personal representative is officially appointed, to file a claim in probate. The general rule is that a creditor’s claim is barred if it is not filed by the later of 4 months after the issuance of the “letters” appointing the personal representative or 60 days after the date that specific notice is given to that creditor. Creditors must file their claims with the Court and serve a copy on the personal representative. A creditor’s claim may be rejected by the executor or personal administrator. If this occurs, the creditor has three months following the rejection before losing all rights to sue. Frequently, the personal representative is unaware of your client’s judgment and neglects to provide notice of the time to file a probate claim. Generally, the personal representative only has to give notice to reasonably ascertainable creditors. If the creditor was unaware of the judgment debtor’s death, the creditor can petition the probate court for leave to file a creditor’s claim. The relief available however, is somewhat circumscribed. A creditor with actual notice of the pendency of the estate cannot meet the requirements under 9103 even if they failed to receive formal notice. Further, a creditor seeking relief must not have known of the facts giving rise to the claim more than 30 days prior to the expiration of the time limits to file a claim under the Probate Code . After that, the creditor’s claim is gone (with the exception of a secured creditor’s lien rights under an abstract of judgment). Thus, it is incumbent upon a creditor that does receive notice to file a timely creditor’s claim. The court will not allow a petition for a late claim when the delay is due to the creditor’s mistake or negligence, which is why working with a collection attorney who has a regular process in place for monitoring the judgment debtor over time is important to preserve a judgment creditor’s rights against an estate.
Utah Probate Lawyer
When you need legal help with a probate case in Utah, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you!
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506