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How a Creditor Can Disrupt Probate

When a Loved One Dies and Creditors Come to Disrupt Probate

by Don Drake, Connelly Law Offices, Ltd.

Probate Connecticut
Attorney RJ Connelly III

"A will designates a personal representative (executor) to make a public record of the decedent's date of passing, usually by posting in a local newspaper," said professional fiduciary and certified elder law Attorney RJ Connelly III. "In part, this information serves as notice to creditors if the decedent has an outstanding debt with them. The personal representative must also make a reasonable effort to notify ascertainable creditors."


"In general, creditor notification is four months after the probate court issues letters of administration or thirty days after learning about the creditor. If the personal representative does not notify creditors within the state’s allotted time, the probate court may rule the creditor may enter a late claim. This situation may apply to spouses who are creditors and can claim breach of fiduciary duty against the deceased."


"Before I go any further in discussing what creditors can do, let me point out that there are some scammers and unscrupulous collectors who are experts at making a family member who lost a loved one feel a false sense of urgency at a time when emotions are running high," said Attorney Connelly. "Let me share two stories with you where such a situation occurred."


"In the first situation, Bob and Lois had just lost their oldest son, James, in a car accident. James lived independently, had an account with a cable company, and paid for the services when due. After James died, Bob called all the utilities and had services terminated. He told the cable company that he was James' father and why the service needed to be terminated. Despite the explanation, the company continued to send bills to James' address, with his father, Bob, listed as the new account owner. The service was eventually terminated, and Bob received a huge bill with the threat of this account going to a collection agency. Our office intervened on his behalf and called the Bureau of Consumer Protection. We were able to get this issue resolved quickly."


Probate Connecticut
Know what you are responsible for

"In another situation, Carl was a power of attorney for a dear friend who was in a nursing home," said Attorney Connelly. "After he passed, the nursing home began sending him letters demanding payment for his late friend's debt. Although Carl made repeated phone calls and sent letters to the business office and the administrator explaining the situation, pointing out that he was not liable for the debt, the nursing home referred the bill to a collection agency that hounded Carl relentlessly. When he brought the problem to us, we were able to resolve the problem."


"Let me point out that unscrupulous creditors caused the examples I just discussed and that most creditors follow the law and are just seeking payment to address the existing debt. Let's continue with our discussion."


Protection for the Creditor

"What if a personal representative makes an agreement with a creditor and then reneges on the arrangement?" asked Attorney Connelly. "In such cases, an estoppel and fraud defense can protect the creditor if a personal representative goes back on their word or makes a seemingly untrue assertion for debt payment. We have seen some cases where a personal representative led a creditor to believe the estate would pay an outstanding debt in full without the creditor filing a claim, thus permitting time to pass and creditor deadlines for the probate court to lapse. If this occurs, the court can estop the personal representative from arguing the claim by the creditor and is time-barred, though there is usually a one-year statute of limitations for this action."


By law, after administration expenses of the estate and state and federal tax payments for the decedent, certain debts must receive payment via the estate as soon as funds are available. These debts include:

  • Funeral expenses.

  • Medical costs in association with the last illness from which the decedent died.

  • Family allowances that provide for financially dependent members to cover expenses during the estate administration.

  • Valid wage claims against the decedent by employees or contractors.

Personal Rep's Responsibility

"Decedent debt liability does not affect a personal representative unless a creditor can prove estate mismanagement by the administrator," said Attorney Connelly. "Generally, a surviving spouse in a community property state equally owes the acquired debt. If there are insufficient funds to repay the debt, a spouse can be liable unless they can prove the debt to be separate. In most cases, any property of a separate surviving spouse will remain safe from creditors."


Probate Connecticut
Seek an experienced elder law attorney

A creditor with a rejected claim by the personal representative of a decedent’s estate may seek the help of a creditor rights law firm to litigate their claim within ninety days of the rejection of the claim. If enough evidence supports and validates a creditor's claim, a court will enter judgment for the estate to pay the claim to the creditor. The creditor now has more latitude to pursue the debt collection.


"A creditor’s claim is not subject to such stringent timelines when the decedent’s property does not pass through probate," stated Attorney Connelly. "In theory, a creditor can track down the property and sue its new owner to satisfy the debt a year or two later. Property distribution without probate has no legal requirement to notify creditors in writing. It is possible for a creditor to not know of the death for years or the property location. If the debt is not large, it may not be worth a creditor’s time to track down the new owners for collection."


Are All Debts the Same Under Law

"To be clear, not all debts are equal and valid," said Attorney Connelly. "A personal representative can negotiate with creditors to lower the debt amount to preserve the maximum amount for beneficiaries and heirs. Any settlement offer must be in writing to protect the estate and all payment data kept in record. In the case of an insolvent estate, the court requires all creditors filing valid claims to receive payment under a pro-rata division of estate assets."


Remember, creditors have the right to pursue valid debts against an estate. If you are a personal representative of an estate with significant debt, hire an experienced and knowledgeable elder law attorney who understands the specifics of the state's probate law. An attorney, like Attorney RJ Connelly III, who is licensed to practice in Rhode Island, Connecticut, and Massachusetts, will help you observe all deadlines, meet probate code legal requirements, and negotiate with creditors to reduce debt.

Probate Connecticut

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