At A People’s Choice, we can help you complete your probate case without having to hire a lawyer. As a legal document assistant, we have filed thousands of probate cases and helped people save hundreds and thousands of dollars in attorneys fees. There are several different ways a personal representative can deal with creditors and debts in California probate and provide the required notice. The first, and most important way is through the required newspaper publication. Our office assists in this critical step. We can also help in preparing other necessary documents you may need to provide estate creditors and interested parties with official notice about the pending probate. Lastly, we can help you respond to disputed creditor claims. Read on to learn more about the steps required to deal with creditors and debts in California probate.
Estate Creditor Notice
As mentioned above, the estate’s executor or personal representative must notify estate creditors. In preparing a last will, the deceased may have left paperwork identifying creditors and the amount of debt owed. During the probate process, the estate’s representative must take precautionary steps to pay all creditors the proper amount owed. In this regard, the court can hold the personal representative liable if they pay a party not permitted under probate law.
Simple Steps to Deal With Creditors and Debts in California Probate
Here are the steps required to deal with creditors and debts in California probate.
- Complete forms Notice of Administration to Creditors Form DE-157 and Creditor’s Claim form DE 172 to start the noticing process.
- Serve all known creditors Notice. Keep in mind, some state agencies need separate and particular notice. For example, the personal representative should notify the California Department of Health Care Services if the decedent was on Medi-Cal. The Director of the California Victim Compensation and Government Claims Board must receive notice if one of the decedent’s heirs or beneficiaries is or was confined in a state prison or any county or city jail. Lastly, the representative will need to send notice to the California Franchise Tax Board within 90 days of the Court Clerk issuing formal Letters.
- Monitor the court’s website to see if a creditor files a claim in the probate case. If a creditor files a formal claim, the personal representative can take one of three actions: (a) accept the claim, (b) reject the claim or (c) ignore the claim. When accepting the claim, the personal representative is agreeing to pay the amount due. If they reject the claim, the representative will need to file formal notice that they partially or fully dispute the debt. Keep in mind, if a creditor is not aware of the administration of an estate, Probate Code Section 9103 allows them to ask the court permission to file a late claim.
If the personal representative ignores the claim or formally disputes the claim, it is up to the creditor to file a formal lawsuit within 90 days of the personal representative rejecting or ignoring the claim.
Paying Valid Claims
- Once the personal representative receives all claims, they need to determine if there is enough money to pay the debts. Some debts have priority such as federal and estate taxes; then probate costs; then funeral costs and lastly creditors. It should be noted if the personal representative has enough money in the estate and there are sufficient funds set aside to pay the administration expenses, Probate Code Section 11421 requires the personal representative to pay the decedent’s funeral expenses, expenses of decedent’s last illness, family allowance and wage claims. It is usually best to wait until the credit claim period has expired before paying other types of debts.
- Pay all valid claims. This would include credit card debts, utility bills, and other items.
What Happens If There Is Not Enough Money in the Estate?
If the estate does not have enough money, the personal representative may have to prorate the amount left between similar creditors. Remember, some creditors have priority, so this apportionment only occurs within creditor “groups.” Here is an example. An estate has $60,000 in debt. $20,000 is owed in taxes, $10,000 for funeral expenses and $30,000 in general creditors. The estate only has $35,000 available to pay debts. The $20,000 tax debt is paid first, then the $10,000 funeral expenses, leaving only $5,000 to divide between the general creditors. In some insolvent estates, the general creditors may receive nothing.
As mentioned above, if you are not sure about the decedent’s debts, wait until the end of the claim filing period before paying any claims. Then you will know the exact total of the creditor’s claims filed. Remember, the claim filing period ends either four months after the court clerk issues Letters OR sixty days after mailing the Notice of Administration, whichever occurs last.
Unfortunately, if an estate is insolvent, the heirs and beneficiaries will not receive anything. If the decedent’s will gifts them specific property or money, these gifts will expire. A beneficiary or heir can only receive probate assets if there is money left over in the estate after the personal representative pays all valid debts.
A General Overview
As discusssed above, when the representative rejects a creditor’s claim, notice must be provided and served on the creditor. The creditor can file a claim against the estate within 90 days of the rejection. The court will conduct a subsequent hearing in front of a judge to assess, validate and/or deny all creditors claims.
There are other claims in probate that decedent’s creditors or relatives may assert. These include funeral expenses, spouse award, dependent child award, monies owed to the decedent’s employees. Interested beneficiaries may also file claims about the distribution of property.
The claims process usually lasts between 60 – 90 days. At A People’s Choice, if necessary, we can help you deal with creditors and debts in your California probate. As mentioned above, the personal representative must provide notice to creditors by publication in a local newspaper. The personal representative may need to complete other documents if they later discover other creditors after the first notice.
Using a Legal Document Assistant for Help
This is a general overview of how to deal with creditors and debts in California probate. More importantly, you should not consider this article as legal advice for a particular situation. Every probate case is different and you should talk to an attorney if you need legal advice about these issues.
As far as the paperwork goes, however, we highly recommend you consider working with an experienced legal document preparer. As such, A People’s Choice is a great option for your probate document preparation. A Peoples Choice has been in business since 1980, helping people file California probate and other types of legal documents. As such, our staff understands the detail and time-sensitive nature of these cases. As a legal document assistant, we can help you deal with creditors and debts in California probate. Call us today at 800-747-2780 or contact us through our website.