Creditors’ Claims Basics

/ August 8, 2012

Man Working on Finances - DBOne of the purposes of probate is to provide notice of the decedent’s death to creditors so that they can seek payment for any unpaid debts. As Jayne Sykora mentioned in her post, What Happens to Debt at Death, personal representatives are able to identify creditors of the estate through the decedent’s mail and bills. However, creditors are able to file a claim against the estate either before or after probate is opened to ensure their claim is known.

Demand for Notice

Once a creditor is aware of the decedent’s death, a creditor may file a demand for notice with the court. The demand asserts the creditor’s right to be notified whenever an order or filing is made with the court. If a probate has not yet been opened, and a demand for notice has been filed with the court, the prospective personal representative must send a notice of intent to file documents to the creditor and, in the case of an informal probate, allow at least fourteen days notice before opening the probate.

Asserting a Claim

When a probate is opened in Minnesota, notice of the proceedings must be published in an approved legal newspaper once a week for two consecutive weeks. This publication is how creditors are notified of a probate and will prompt creditors to assert their claim(s). Typically, a creditor has four months to file or present their claim from the date of the published notice. Minnesota Statute 524.3-803 outlines additional limitations on presenting claims.

Upon receipt of the claim, the personal representative has to determine whether or not to disallow the claim. The personal representative has to notify the creditor if the claim is barred or if no notice of disallowance is given, within the allotted time, then the claim is deemed allowed. Even if a claim is allowed, it does not necessarily mean the claim will actually be paid. If the estate is insolvent, certain creditors may go unpaid despite the fact the claim was allowed. Minnesota Statute 524.3-805 prescribes the order of priority for payment of claims and there are certainly times when claims at the end of the priority list are not ultimately satisfied.

Creditor as Personal Representative

Another alternative a creditor may take to satisfy a debt is seeking appointment as personal representative of the estate. In Minnesota, any creditor of an estate may seek appointment as personal representative forty-five days after the death of the decedent if no other personal representative has been appointed at that time.

Personal Representative’s Liability

It is important that personal representatives handle creditors’ claims properly. They can be held personally liable for paying claims that do not have the priority to be paid. See my post Handling Estate Debt for guidance on how to address claims and expenses typically associated with probate.

For any questions about creditors’ claims against an estate, contact an attorney who will be able to assist with the specifics of your particular estate or probate.

 

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