If your loved one passed away with unpaid debts, there's a good chance the banks and lenders will want to collect the money out of your loved one's estate. If you've been appointed as the personal representative, you must deal with these creditors in accordance with Florida law—but you may not have to pay every creditor that comes forward.
How to Handle Creditor Claims During Probate
Of all the reasons to hire an attorney for probate, none is more worthwhile than the obligation of debt payments. There are rigorous requirements involved in notifying and identifying creditors, and failure to serve them in a timely fashion can result in probate delays and lawsuits against the estate.
As the personal representative to the estate, it's your job to:
- Identify all creditors. It can be difficult to tell how much money your loved one owed prior to passing away. Typical debts include funeral home service, burial expenses, final medical costs, and assisted living payments. If a loved one passed away suddenly, there may be secured debts (such as mortgages, car loans, credit card debt, and personal loans), outstanding child support, or damages from court claims. It's a good idea to compile a spreadsheet of each creditor, including the amount owed and when the debt was incurred. The personal representative should also review the decedent's bank account to look for any recurring type payments that could show the decedent paying any unknown debts.
- Issue notices. You (really, your attorney) will have to give all creditors official notice that your loved one has passed away and that the Florida probate estate is pending. In addition to sending notices by mail to known creditors, you'll have to publish notice of the death in a local newspaper to allow unidentified parties to come forward. A good Florida probate attorney will do this for you.
- Allow the creditor period to expire. Creditors have a limited window to collect after they have been notified of the debtor's death. Creditor claims have to be filed with the probate court 30 days after receiving a Notice to Creditors or three months from the publication date (whichever is later). Even without official notification, most creditor claims are barred if not filed within two years of the decedent's death.
- Dispute claims. Once the creditor period expires, you can object to any pending creditor claims that don't have merit. Debts can be legally disputed for a number of reasons, including the amount of balance or fee charges, unfair collection practices, late claims, or identity theft. If you object to any of the estate's debts, the creditor has 30 days to file a complaint or independent court action to pursue the claim. Otherwise, the creditor gives up the right to collect.
- Pay debts according to state law. Florida law sets a specific order in which a person's final expenses should be paid. First priority is given to the costs administering the estate, attorney fees, and your fee for acting as personal representative, followed by funeral and burial expenses. After that, you must settle taxes and preferred debts under federal law, debts owed to public assistance programs, and unpaid court costs. Next, medical expenses incurred in the last 60 days of the decedent's life are paid. Finally, money is paid to surviving relatives for a family allowance and child support arrearages. After all of these have been satisfied, any other claims are paid out.
- File your accounting with the court. Once you have satisfied all legitimate debts, you'll be required to file an accounting of all of these transactions with the court. If you made a spreadsheet, you should add information on which debts were paid, how they were paid (personal check, online bill pay, etc.), and the date the debt was settled. You should also include payment records from each creditor acknowledging that the debt is paid.
If you need help with your duties as a personal representative, our attorneys can ensure all the necessary steps of closing the estate are followed in accordance with the law. Contact us today to set up a consultation and get answers to your questions, or read through our free book, Navigating the Florida Probate Process.