Creditor Rights to the Estate

What happens to someone’s debts when they die? Creditors have certain rights they can assert during the probate process so that they may be paid on these debts by using money from the estate. Read on to learn more.

When a person passes away, certain property that they owned becomes part of their probate estate. The deceased person is called the “decedent.” Probate is the process by which the district court administers and distributes the decedent’s estate upon their passing. Click HERE for an overview of the probate process as a whole.

During probate, the Personal Representative is responsible for administering the estate, paying creditors, and distributing assets. Click HERE to learn more about what the Personal Representative does. In this post, we’ll focus on the Personal Representative’s responsibility to pay creditors.

A “creditor” of the estate is any person who may have a claim against estate property. Creditors may already be known to the Personal Representative but sometimes are unknown. At a certain point during the probate procedure, the Personal Representative will give notice to all known and unknown creditors, by both mail and newspaper publication. This notice gives the creditors a certain amount of time to come forward with a “creditor claim” against the estate.

Once a creditor claim is received, the Personal Representative has to determine if the claim is valid. The Personal Representative can reject all invalid claims. As to valid claims, the Personal Representative will need to file an application with the court for approval to pay the claim. Once approved, then the Personal Representative can pay the creditor.

In order to pay off certain debts, the sale of estate assets may be required. The process of selling assets of the estate during probate is called a “239 Sale.” Stick around because we’ll go over 239 Sales in our next post!