Probate Creditors' Rights Under Texas Law

By Anna Assad

Creditors of a deceased person, known as the decedent, have specific rights under Texas law. Once the personal representative starts probate proceedings to settle the estate, he must notify creditors and address debts in accordance with state probate laws. Creditors have the right to take action in probate court to recover owed debts.

Notice

To notify creditors of the decedent's death, within 30 days of his legal appointment, the personal representative must place an ad in the legal notice section of a newspaper distributed in the county where the probate proceedings are being held. He must send notice in writing, by mail, to all creditors with debts secured by property, such as real estate or personal items, within 60 days of his appointment. The representative may be liable to creditors if he fails to publish the notice in the newspaper or mail the notice to the secured creditors within the timeframes set forth by Texas law.

Debt Priority

While all creditors with legal, valid claims have the right to payment in Texas, state law assigns debt priority by class. Federal debts take top priority even though state law does not assign these debts a class. Class 1 debts are funeral expenses and medical expenses under $15,001 related to the deceased's last illness. Medical expenses over $15,000 are part of the class with the lowest priority. Class 2 consists of debts related to estate administration and the preservation and management of estate assets and property. Secured debts make up Class 3, but only up to the amount for which the secured property sells. Class 4 is for past due child support, while Class 5 includes taxes, penalties and interest owed to the state. Class 6 is for expenses related to confinement in the Texas penal system, while Class 7 is for repayment of medical expenses paid by the state. Class 8 covers all other debts, such as credit cards and personal loans.

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Claims

Creditors of secured debts have the right to file claims against the estate before the court closes the proceedings. Creditors with unsecured debts, which are debts not secured by an asset or collateral, must file a claim within four months of the legal ad notice publication. A creditor must file a claim with supporting papers, such as a copy of a bill, in the Texas probate court handling the estate proceedings. The claim must contain the account number, debt type and total amount owed and have an attached sworn statement confirming the debt's validity. The court must approval a claim for payment.

Nonpayment of Claims

A creditor can file a sworn statement in the probate court for nonpayment of an approved claim. The statement should indicate the debt is still owed and make a demand for payment. The court may allow the creditor to seize property of the estate to satisfy the debt plus interest, as well as the creditor's legal costs. If beneficiaries take or sell property without paying the creditors from the proceeds, the creditors may sue the beneficiaries. Beneficiaries may be personally liable to the estate creditors, but only for the amount of money the creditors would have received during probate.

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What is the New Jersey Statute of Limitations for Claims Against a Decedent's Estate?
 

References

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