When someone passes away in California, how are their unpaid debts and claims against the estate handled during probate? Here is an overview of this important process:
Notice to Creditors – The estate administrator must publish a notice alerting any creditors to make claims within a 4-month window. Known creditors are notified directly by mail as well.
- Filing Claims – Creditors must properly file a timely creditor’s claim to preserve their right to payment. Supporting documentation like bills and statements should be included. Medical bills, credit cards, loans, and taxes are common claims.
- Allowed vs Disallowed – The estate administrator reviews all claims and can accept or reject them. Rejected claims must be pursued in court via a lawsuit against the estate by the deadline stated in the rejection notice.
- Priority of Claims – Allowed claims are paid from estate assets in a specific order per California probate law. Costs of administration are first, then funeral expenses, followed by family allowance, debts/taxes with preference under federal law, and general creditor claims.
- Secured Debts – Creditors with collateral rights against estate property, like mortgage lenders, may seek payment by foreclosing on that property if claims are defaulted.
- Insufficient Assets – If the estate lacks cash to pay all claims, property may need to be sold. Net proceeds are disbursed in the order of priority. Excess lower priority claims are generally discharged.
- Probate Referee Role – This court-appointed referee will conduct an inventory of estate assets to establish valuation if the estate’s sufficiency is in doubt.
Navigating creditor claims is a key responsibility of the estate administrator during probate in California. Legal guidance is invaluable. Contact our experienced probate attorneys for assistance.
