Can a Creditor Demand That an Estate Be Established for the Deceased?

By Heather Frances J.D.

Your debts don’t die with you when you pass away. Instead, your creditors come after the assets in your estate – property you owned at the time of your death – to satisfy your debts. Your family may try to avoid this by not establishing an estate for you after your death, but your creditors are generally able to establish your estate even if your loved ones fail to do so.

Your debts don’t die with you when you pass away. Instead, your creditors come after the assets in your estate – property you owned at the time of your death – to satisfy your debts. Your family may try to avoid this by not establishing an estate for you after your death, but your creditors are generally able to establish your estate even if your loved ones fail to do so.

Establishing an Estate

Establishing an estate generally means opening a probate proceeding, with or without a will. Probate is the process whereby a representative is appointed for your estate then gathers your assets, pays your debts and distributes any remaining assets to your beneficiaries. State laws vary, but probate generally involves a period in which creditors can submit their claims to your estate’s representative for payment. This is typically the only way for creditors to get paid for debts you owed at the time of your death. For example, if you owe money to a credit card company when you die, the credit card company has a right to pursue payment from assets you owned at the time of your death, but probate is the only way for the company to take those assets.

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Interested Persons

Generally, your probate estate can be opened by any “interested person.” The categories of people who qualify as interested for purposes of opening your estate vary between states, but creditors typically qualify since they have a financial stake in your estate. Since probate is the only way for your creditors to get payment from your assets, state laws generally do not allow a deceased person’s family to avoid paying creditors by simply not opening a probate proceeding. Thus, if your loved ones refuse to open your estate for probate, your creditors can open it.

Creditor as Representative

Though one of your creditors can open your probate estate, the court might not permit the creditor to act as the representative of your estate. Since your estate’s representative has the power to approve or deny creditor claims, the court could decide your creditor has a conflict of interest and therefore should not have the power to control your estate. Instead, the court can appoint a friend, family member, attorney or other appropriate representative.

Appointment Priority

If you nominate an executor in your will, the court will likely appoint the person you named. The probate court can, however, appoint someone else when appropriate. For example, if you die without a will or the person you nominated refuses the appointment, the court can appoint another personal representative. In states like New Mexico, all heirs with a right to act as your personal representative must approve a creditor's appointment before the court will appoint a creditor as your estate’s representative. In New Mexico, such cases must be filed in a District Court rather than the specialized Probate Court.

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Define Probate Law

References

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