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How do you file a claim against someone’s estate?

On Behalf of | Jun 21, 2021 | Estate Planning |

Someone who owes you money may be slow about paying you back. You may have to agree to small monthly payments, especially if they are an older adult living on a fixed income. Being flexible makes it easier for people to pay you back, but it also means you risk not receiving full repayment.

One of the concerns with payment arrangements is the possibility that the debtor will die without paying you in full. If they don’t have a cosigner, that means there is no one else still responsible for the debt after their death. Your only option to recover your losses will likely require making a claim against someone’s estate. What does that process involve?

Step one: Learning about the death

There are numerous ways that you might learn about the passing of someone who owes your business money. You might receive notification from their executor as they go through the financial records of the deceased individual. Alternately, you may learn about it when your mail gets returned or when the estate publishes notice of the death in the local newspaper. You may only realize that there is an issue when you can’t reach the borrower or when their payments stop.

Step 2: Filing a claim with the probate courts

You will typically have up to a year to file a claim for repayment in probate court. You will file your claim within the ongoing probate proceedings for the estate. If an executor has not initiated probate, your claim may be the first step in that process.

You will need to notify the executor or personal representative of the estate about your claim within 30 days of filing with the court. If the executor rejects your claim or doesn’t respond to it, you will have to go to court. If the courts validate the debts and agree to your claim, they will issue a judgment that means the executor will need to repay you with assets from the estate before they distribute property to beneficiaries or heirs.

Getting information from the courts about the estate can help with the process. For example, if much of the debtor’s property is in a trust but they funded the trust after incurring your debt or within weeks before their death, you may have a more complex legal issue on your hands.

Understanding what it takes to demand repayment when a debtor dies will help you protect your company’s finances and ensure that people meet their obligations to your business.