Being a Creditor in Probate Proceedings
When a person dies, they almost always leave behind unpaid financial obligations. This can be in the form of credit card debt, automotive loans, a mortgage, or perhaps it is money owed to a home health care provider or hospital for expenses incurred caring for the deceased shortly before their death. When this happens, creditors, those to whom the money is owed, have the right to try to collect from the estate the deceased has left behind. A probate creditor is a person or entity who makes a claim to collect money owed from the estate of a deceased debtor.
Could you be a Probate Creditor?
While the most common probate creditors are companies such as those listed above, most people don’t realize that almost anyone with a financial claim against the deceased can be a probate creditor. The Nevada Revised Statutes 147.195 provide a helpful list of who has priority of payment for debts owed at the time of death. This list is broad and includes the following in order of payment priority:
Expenses incurred as a result of administration of the estate
Expenses to cover the funeral costs
Expenses of the deceased’s last illness
Family allowance
Debts owed under the laws of the United States
Money owed to the Department of Health and Human Services for Medicaid
Wages the deceased needed to pay
Money owed by way of a judgment against the deceased
All other demands against the estate
If the deceased owed you money and it qualifies as one of these types of debts, you are likely a creditor of the estate. The final category is purposefully broad to allow for money owed between family members or other claims that not typically seen as creditor claims. If you believe that you are a creditor to a deceased person’s estate, continue reading to get a firm grasp of the probate process and your rights as a probate creditor.
Rights of Creditors in Probate Proceedings
Now that we understand who can be a creditors, we must address a tough issue creditors face: knowing when the person who owes you money has passed away. The State of Nevada provides a procedure whereby creditors receive notice of a person’s death and lets them know that probate is underway for their estate. When an estate is opened with the probate court, the personal representative of the estate is required to publish notice and mail notice to creditors. Publishing notice is specifically aimed at informing creditors who are unknown to the person who is administering the estate. While a known probate creditor will receive notice through the mail, unknown creditors will receive no such notification and must rely on published notice. This notice must comply with Nevada Revised Statutes 155.020, which contains the following criteria:
Notice by publication must occur on three separate dates and if the newspaper is published more than once a week, there must be at least ten days between the first and last dates of publication, not including the first and last day.
Notice must be published in a newspaper in the county where the proceedings are pending.
Notice must comply with the form outlined in the statute.
After receiving notice either by mail, or by publication, the probate creditor will have a very tight window in which they must file a creditor claim in the court where the probate matter is pending. For estates worth less than $300,000.00, creditors have 60 days to file their claims (NRS 145.060(2)) while in the case of an estate worth more than $300,000.00, creditors will have 90 days (NRS 147.040(1)). Probate creditors must take care to observe the deadlines prescribed by this statute. The Nevada Revised Statues 147.040(3) states that if “a claim is not filed with the clerk within the time allowed […] the claim is forever barred.” In other words, if you fail to file a claim within the allotted time, the claim can never be brought. The only exception to this strict rule is if the creditor did not receive notice of the opening of the estate, and therefore did not know to file a claim as a probate creditor. However, you can safely bet that in general, personal representatives do their very best to notify every possible creditor so that this strict time limit can be enforced against as many probate creditors as possible.
Once a creditor files a claim against the estate, the personal representative must either accept the claim or reject it. NRS 147.120 allows the personal representative to accept creditor claims, while NRS 147.130 provides the rejection process. If your claim is accepted, payment will occur at the conclusion of the estate’s administration. If the personal representative rejects your claim, you will have 20 days following the rejection to petition the court for a determination of the claim’s validity, pursuant to NRS 147.130(2). If this course of action is unsuccessful, a creditor can also choose to file suit against the estate in civil court seeking payment of the debt. Considering the costs incurred through litigation, a creditor should think long and hard about whether the debt is large enough to justify a lawsuit.
Alternative Routes to Collection: Administering the Estate
In wrapping up our discussion on being a probate creditor we must not overlook the one issue that can delay debt collection from an estate indefinitely, and that is an estate which has not been “opened” with the probate court. Until the probate process has been initiated with the court, debts cannot be settled on behalf of the deceased. When a relative or loved one has not stepped forward to begin the probate process and act as the personal administrator of the estate, an interesting opportunity exists for a creditor to take charge of the situation in order to collect. The creditor can open the estate themselves. Creditors can act as personal representatives to an estate and still file a creditor claim against the estate (see NRS 147.050). In addition to being able to collect their claim from the estate without the possibility of rejection (as the administrator of the estate, you would, of course, accept your own claim), a creditor acting as personal representative would also be entitled to collect fees from the estate for their work administering the estate. This option likely sounds like the ideal situation for collecting from an estate, despite the additional work of acting as Administrator, however, it must be again noted that this is only possible in cases where the estate has not yet been opened with the court. If an administrator has already been appointed, you will have to file a claim through the process detailed above.
If you believe you have a claim for payment from an estate, contact us today.
We specialize in probate proceedings and can assist you with filing a claim or administering an estate.