What Is a Creditor Claim? Definition, Uses and Importance.

When in probate, creditors have a period of time to make a claim on the estate. A credit claim occurs when money is owed by the decedent or the person who passes away. Credits make a claim to the money that is owed to them which must be paid out of the estate. The estate executor has a responsibility to announce the persons passing publicly so that creditors can receive notice and the creditor has a period to file a claim to the estate. These claims are usually filed with a Court and served upon the personal representative (executor) or the attorney in the probate matter.

Paying decedent’s debts to creditor claims during probate

For the probate to continue, the decedent’s debts have to be paid in full. This payment is a step in the probate timeline will come after there has been an agreement between the executor and the creditors on the specified amount.

What creditors have no right to do 

The amount owed by the deceased must only be paid from the estate of the deceased. Any unscrupulous creditor pressuring the family or representative of the deceased to pay his debts must be ignored or taken to court.

Any payment that cannot be paid from the decedent’s estate, it will usually be written off as bad debt in the books of the creditor.

Timeline for creditors settlement

Specific time frame, as defined by state probate laws, during which creditors can file a claim against a decedent’s estate. A creditor can file a claim for the amount owed to him by the deceased within four months of appointing a representative. If the creditor doesn’t file a claim within this period or within 60 days of receiving a letter from the appointed representative, he is barred from making a claim.

The representative also has four months to file an objection claim to refute the claims of the creditor.

How Creditor Claims Work

The representative/executor has the right to pay the creditors off whether or not they file a claim at the death of the willer. However, the creditor should file a claim within the creditor period if no word is heard from the executor.

There could be some disagreement between the executor and the creditors regarding the amount owed. If such a situation arises, the executor can file an objection to the claim.