Understanding Estate Creditors Rights

As the economy has slowed, it seems creditors have become increasingly persistent in collecting debts

. When a family member passes away, heirs can often feel overwhelmed at the prospect of dealing with unpaid bills. When it comes to creditors and probate, many people ask, Do I have to pay the decedents bills?

The first thing to recognize is that unless a family member was a signatory to the debt (actually signed on as an original borrower or guarantor of the debt at the outset) there is no obligation on the part of any family member to personally pay the decedent's debts.

In an estate proceeding, creditors have a right to be notified that a borrower has passed away and an estate has been opened. The decedents creditors have a right to file a claim against the estate assets. Whether they will be paid in whole or in part from the estate assets is a question to be evaluated by the estate attorney

In conducting a probate proceeding, one important step is to minimize the time period in which creditors can file claims against the estate. This can accomplished by publishing a document entitled Notice to Creditors in an approved newspaper. Ninety days from the first publication date all creditors who cannot be discovered after a diligent search and who havent filed a claim against the estate will forever be barred from doing so. This does not apply to mortgages, secured loans, and properly filed liens (such as final judgments), or creditors that could have been found after a diligent search of the decedents records.

Finally, one little known fact is that two years from the date of death of a decedent, creditors claims against the estate are barred. In other words, these claims fall away and are not enforceable (mortgages, secured loans and perfected liens among the exceptions to this rule). There have been beneficiaries of estates who have determined that it is in their best interests to wait until two years from the decedent's death before opening a probate action thereby barring certain debts from collection. However, this decision should only be made after consultation with a qualified Florida probate attorney.

The decision to pay creditors involves several considerations by the attorney for the estate. First and foremost of which is whether there are funds available in the estate to do so. Certain assets, such as a homestead, cars regularly used by the decedent, and certain personal property may be exempt from unsecured creditors claims. If there is little else in the estate, certain creditors may not be paid at all.

You need a clear understanding of who is owed by the estate before initiating probate and you should discuss the assets and debts with a Florida probate attorney to gain a full understanding of the options available.

by: Dawn Ellis

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