Filing Creditor's Claims 101: Basic Steps for Collecting Debt Owed by an Estate
Related Practice: Trust & Estate Litigation
This is the first installment in a two-part series addressing creditor claims against an estate. This segment reviews how to file a creditor’s claim with an estate when the decedent owes a debt. Part 2 will cover the process for filing a lawsuit should the claim be rejected.
Washington creditors seeking to collect a debt from an estate are required to follow certain steps outlined under state law to file a claim to be paid. Whether it is probate or nonprobate estate, the guidelines are very similar, with just a few exceptions.
Probate estates have a personal representative or administrator who manages the estate’s affairs. When a creditor files a claim for payment, the personal representative must determine whether the claim is valid and the creditor is “reasonably ascertainable.” To do so, the personal representative must exercise “reasonable diligence” by conducting a review of the decedent’s correspondence, including financial records, loan documents, checking accounts, bank statements, tax returns, emails and other electronically accessible accounts.
The personal representative then provides notice to creditors in a variety of ways, including directly requesting the creditor present a claim against the estate, filing notice with the probate court, publish the notice in a legal newspaper, and mail a copy along with the decedent’s social security number to the Washington Department of Social and Health Services.
Contents of Creditor’s Claim and Time Bar
Once the creditor receives the notice to file a claim, the claim must be signed and include:
- Name and address of claimant.
- Facts and circumstances regarding basis of claim.
- Amount of claim.
- If secured, nature of security and due dates.
The creditor must serve the claim to the personal representative or his or her counsel by regular first-class mail within the applicable timeline. The timeline can span between 30 days and 24 months, depending on how the creditor received notice to file a claim. Download a reference guide for the applicable time bar.
The creditor must also file the original signed creditor’s claim with the probate court. The claim is deemed presented once filed with the court and served on the personal representative, whichever is later.
Once the claim has been served, the personal representative can allow or reject all claims in whole or in part. If the personal representative has not allowed or rejected a claim within four months of the first publication of the notice to creditors or 30 days from the filing of the claim, the creditor can serve written notice to the personal representative that it will petition the court to have the claim allowed. If the personal representative does not respond within 20 days after that notice, the creditor can petition the court for a hearing to determine whether its claim should be allowed.
Claims for $1,000 or less are automatically allowed unless the personal representative rejects the claim. For claims higher than $1,000 that are allowed, the personal representative must notify the creditor by personal service or regular first-class mail.
The procedure for filing and handing creditor’s claims in nonprobate estates is identical to that of probate estates, but with the following exceptions:
- A qualified “notice agent” provides notice to creditors.
- A “notice agent” may give nonprobate notice to creditors when there is no knowledge of a personal representative or other notice agent in the state, and no knowledge of any case number issued for the estate.
- Property liable for creditor claims includes the decedent’s probate and nonprobate assets that were subject to the satisfaction of the decedent’s liabilities immediately before death.
- A notice agent may pay a creditor’s claim from assets received as a result of the decedent’s death, except as provided in a Trust and Estate Dispute Resolution Act (TEDRA) agreement or pursuant to court order.
- A notice agent may allow or reject claims, but must pay allowed claims in this order:
- Cost of administering assets.
- Funeral expenses.
- Expenses of last sickness.
- Wages due for labor within 60 days of death.
- Debts with preference established by law.
- Taxes, debts or other fees owed to the state.
- Judgments that are liens on real property.
- All other demands.
Sometimes the creditor’s claim will be rejected. When that happens, the personal representative will notify the creditor of the rejection and file an affidavit with the court. Occasionally the personal representative will settle the claim if it is determined to be in the best interests of the estate. However, if that does not happen, the creditor has 30 days to file suit on the rejected claim. In our next installment in this series, we’ll review the process for filing suit when a creditor’s claim is rejected.