As the executor of your loved one’s estate, you are responsible for managing their affairs. That includes settling any outstanding debts.
Handling creditor claims is a significant part of the estate administration process, and mismanaging this responsibility can lead to personal liability. That said, it helps to know what creditor claims are and how to handle them properly.
Creditor claims defined
Creditor claims are demands for payment made against the estate. They can come from individuals or entities to whom the deceased owed money, such as:
-
Banks
-
Funeral homes
-
Healthcare providers
-
Credit card companies
-
Tax collection agencies
-
Credit card companies
A creditor claim typically contains several key elements, such as creditor information, the deceased’s information, the total amount of debt and supporting documentation, among others.
The obligations of executors
You have several legal obligations regarding creditor claims. These include but are not limited to:
-
Notifying known creditors of the death and the estate administration
-
Publishing a notice to creditors in local newspapers
-
Review and evaluate all claims submitted within the statutory period
-
Pay valid claims in the order prescribed by law
In New Jersey, creditors have nine months from the date of the debtor’s death to file a claim. If they fail to do so, you will not be personally liable for the debt.
Creditor claims can impact probate and estate administration
Creditor claims often extend the duration of probate. This is important to know because you cannot distribute the estate’s assets until you settle all valid claims. With that in mind, it is highly advisable to notify creditors as soon as possible to minimize delays.
Another source of delay is disputes. Some creditor claims may be invalid, and you can dispute these claims to protect the estate. However, disputed claims can lead to litigation, which can further extend probate and potentially reduce estate resources through legal fees.
Moreover, these claims can impact the estate’s solvency. If claims exceed available assets, the estate may become insolvent. This can significantly alter how you can distribute remaining assets.
Legal help may be necessary
Probate and estate administration can already be difficult to manage for executors. Unfortunately, creditor claims can further complicate these processes.
Nevertheless, legal help can be an invaluable tool during this challenging time. A probate attorney can help you manage all claims, explore options and settlement and protect your loved one’s assets as much as possible.