Handling Creditor Claims in Probate

The Letters issued by the Court grant authority to the Personal Representative to administer a decedent’s estate under the Independent Administration of Estates Act. The court can grant the representative Full or Limited Authority. This authority includes a wide range of rights and responsibilities, one of which is handling creditor claims in probate.

How to Notice Creditors in California Probate Proceedings

The Personal Representative should make every effort to discover all existing creditors early in the Probate process.  This requires sorting through the decedent’s bills, documents and bank statements. A list should be made and kept that identifies discovered creditors and should include creditor name, address, amount due and type of debt. Furthermore, all creditors should be notified of the death of the decedent.

Importantly, all creditors known or reasonably known to the Personal Representative as well as those discovered after Letters are issued need  formal Notice of Administration of the probate proceedings. The purpose of this notice, in particular, is to allow the proper amount of time to elapse (claim period) in order for creditors to claim any debts or obligations owed by the decedent. Correspondingly, creditor claims in probate are subject to a claim filing period –  the later of 4 months after Letters were first issued, or 60 days after the last Notice of Administration was mailed. The Notice of Administration starts the clock to give the creditor time to file its claim.

When New Creditors Are Discovered During Probate Process

In the event that more creditors are discovered at a later date, the Personal Representative will have to send another Notice of Administration to these newly discovered creditors. This is another Notice of Administration with a new date to allow the newly discovered creditor enough time to file its creditor claim. Next, the Notice of Administration is mailed to each creditor along with a blank Creditor’s Claim form. With this in mind, the Notice of Administration should be mailed to creditors within the later of: 1) four months after the date Letters are first issued, or 2) 30 days after the discovery of a creditor. Lastly, each Notice of Administration sent will have to be filed with the court. The Notice of Administration will show the date the notice was mailed to the creditor(s).  In this case, the Personal Representative will have to wait until the end of the claim filing to see what claims are filed.

Creditor Claim Period in California Probate

In reality, often the Personal Representative has issued payment to creditors even before Letters are issued based on Probate Code Section 10552. In this regard, this Code section allows payment of such debts without court involvement.

Remember, once the Notice of Administration is sent to the creditors, each creditor must file a Creditor’s Claim with the court. This must be done either 120 days after Letters were issued or 60 days from the date notice was received. With this in mind, the Personal Representative should check the court website regularly to see if any claims are filed. Furthermore, there are some creditors who merely mail the claim to the Personal Representative but do not file a claim so it is important to keep track of such creditors.

Accepting or Rejecting Creditor Claims in Probate

If a Creditor’s Claim is not filed or if it is untimely, then the creditor has waived its right to the amount owed. In the event a Creditor’s Claim is filed, the Personal Representative will have to accept or reject the claim in full or in part. In this regard, the Personal Representative will have to formally file an Allowance or Rejection of Creditor’s Claim indicating whether the Creditor’s Claim is accepted or rejected. This must be done within 30 days of receipt of the Creditor’s Claim.

Another key point, if the Creditor’s Claim is rejected, the creditor will then have 90 days to file a lawsuit or else the creditor waives its right to a claim for the debt. Finally, if the Personal Representative accepts the claim, then payment should be issued. Keep in mind, the Personal Representative can ask for more information from the creditor to decide if in fact it is a valid claim or try to negotiate any claims and then issue payment. With this in mind, the Allowance or Rejection of Creditor’s Claim will have to be filed with the court, along with a copy of the Creditor’s Claim.

Keep in mind, it is the responsibility of the Personal Representative to investigate fraudulent or false Creditor’s Claims. In other words, the Personal Representative should check all Creditor’s Claims to confirm that each one is, in fact, a valid claim. This includes making sure the claim is properly signed, dated and verify that the debt was incurred before the date of death.

Creditor Claim by Personal Representative

Finally, if the Personal Representative requires reimbursement for any funeral expenses or debts paid from personal funds, the Personal Representative must file a Creditor’s Claim (including attachments as proof of payment issued with the court. At the same time, the Personal Representative should also complete an Allowance or Rejection of Creditor’s Claim for the court’s approval. Ultimately, the Personal Representative will be entitled to reimbursement if the court approves the claim.

Handling creditor claims in probate is an exacting process and care must be taken to make sure the steps are properly completed. Contact A People’s Choice for help filing probate in California as well as help dealing with creditor claims that may be filed. Call us today for a free phone discussion about your situation and particular needs. We are here to help you get through this process as inexpensively as possible.