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Creditors may file claims against estates for unpaid debts

On Behalf of | Jan 20, 2023 | Probate |

During probate, executors will need to handle claims filed against estates to recover unpaid debts from the deceased’s assets. The Superior Court of California website notes that an estate’s personal representative also owes a duty to notify the deceased’s known creditors.

Executors generally notify those creditors with outstanding debts or potential claims that may recover the amounts owed through the probate court. Having access to the deceased’s most recent billing statements could help the estate’s personal representative confirm which creditors to contact.

Notifying creditors of their rights to file claims

Personal representatives may not need to search for every creditor. Their duty extends to contacting known creditors and informing them of their right to file a claim. Secured and unsecured creditors may receive notices, as well as individuals who lent money to the deceased.

The probate court may not allow executors to mail notices to creditors by themselves. Personal representatives need proof of service that creditors received information about the deceased. If an unpaid creditor files a claim, executors can negotiate a settlement or compromise on behalf of the estate.

Using assets from the estate to settle debts

As noted by Bankrate, debts paid from the estate may reduce the value of assets for the deceased’s beneficiaries. Until the court resolves possible issues with creditor claims, beneficiaries will not receive their inheritances. California’s community property laws could also require a surviving spouse to pay the balances left on jointly owned accounts. In some cases, executors may sell assets from the estate to cover unpaid debts.

If the deceased owes taxes, representatives must contact the local or federal tax agencies. Medical professionals and hospitals may also file claims to recover from the estate before the court distributes assets to beneficiaries.