A Personal Representatives’ Guide to Dealing with Creditors

Woman sitting with a pile of papers

If you have been named a personal representative for a loved one’s estate, you may suddenly find you have a lot on your plate. One of the less desirable parts of any personal representative’s job is dealing with creditors seeking to collect on your loved one’s death. Find out how Florida law on deceased debt works, and what you need to do to satisfy creditors’ rights on your loved one’s behalf. Please note that this information pertains to dealing with creditors in a formal administration. For some information on how this differs from a summary administration, you can visit our blog post here.

Step 1: Identify All the Estate’s Creditors

Nearly every estate has at least one creditor -- the funeral home. However, some Florida residents pass away with more debt owed than others. One of your first priorities as a personal representative (formerly called an executor) will be to identify all the estate’s creditors. These can include:

  • Funeral and burial expenses
  • Final medical costs
  • Household expenses or assisted living payments
  • Secured debt like mortgages and car loans
  • Consumer debt like credit cards and personal loans
  • Direct loans from family or friends
  • Claims for damages

As a personal representative, it is up to you to do a diligent search and track down any known or reasonably ascertainable creditors. This starts by having the deceased’s mail forwarded to you, getting access to their email accounts, and collecting statements.

It is a good idea to start a file folder and spreadsheet or other tracking system early on to manage all the estate’s assets and debts. You can make note here of the creditors’ names, addresses, balances, and the purpose of each debt. Then put a copy of each statement or invoice into the folder for safe keeping. Doing this will help keep everything straight, reduce attorney fees, and make it easier to meet your accounting responsibilities to the Probate court later on.

Step 2: Issue Notices to Creditors

Once you know who the creditors are, you need to give them notice that your loved one has passed away and that a Florida probate estate is pending. You are also legally required to publish notice of your loved one’s death in a local county newspaper. Your estate administration attorney can help you complete the necessary paperwork and document when the notices were sent.

Step 3: Wait Out the Creditor Period

Creditors have 3 months from the first publication date or 30 days after receiving their Notice to Creditors, whichever is later, to file a claim in the Florida probate court to collect on their debts, or their claim may be barred. However, these deadlines do not apply to known or reasonably ascertainable creditors who were never served with a Notice to Creditors--thus the importance of identifying any such creditors and properly serving them in a timely fashion. Notwithstanding these deadlines, with few exceptions, creditor claims are barred altogether if not filed within two years of the decedent’s death.

While you are waiting for the creditor period to pass, you should be working with your estate administration attorney and your loved one’s bank and financial advisor to gather and value their assets. This doesn’t necessarily mean you need to sell every piece of furniture. However, by knowing the value of remaining bank accounts, personal property, and other assets, you will be prepared to pay off the creditors with valid claims when the time comes.

Step 4: Object to Bad Debts

You don’t give up your rights to a fair collection of debts when you die in Florida. Florida law on deceased debt says once the creditor period is over, the personal representative of the estate can object to any pending creditor claims, including for the following reasons:

  • Identity theft
  • Untimely claims
  • Disputes over the balance or fees charged
  • Unfair collection practices

If you file an objection to any of the estate’s debts, the creditor then must file a complaint or independent action within 30 days to pursue the claim or give up their right to do so.

Step 5: Satisfy Debts in Priority Order Out of the Probate Estate

Florida law lays out a specific order to pay a person’s final expenses and satisfy creditors:

  1. Costs of administering the estate -- including attorney fees and your reasonable fee as a personal representative.
  2. Funeral, burial, and internment expenses up to $6,000
  3. Taxes and preferred debts under federal law, along with claims in favor of the state for unpaid court costs, fees, and fines
  4. Final medical expenses for the last 60 days of the decedent’s life (including attendant care costs)
  5. Family allowance
  6. Child Support Arrearages
  7. Debts acquired after death by the continuation of the decedent’s business, but only to the extent of the assets of that business.
  8. All other claims

However, remember that Florida asset protection strategies can carve out money and property and shield it from creditors. Certain categories of property are also exempt from creditor claims by their nature.

What Happens If the Estate’s Assets Won’t Pay All the Debts

The good news is, as long as you identified the debts and sent out notices, you and the estate’s beneficiaries won’t be responsible for any of your loved one’s unpaid expenses. Instead, each class of debts are paid out together. When there isn’t enough money to pay an entire class, the Florida probate court will divide the remaining assets among all the creditors on that level. Whatever is left gets written off as uncollectible.

Step 6: File

Once all the creditors have been paid, and the remaining assets distributed to the estate’s beneficiaries, your last job as personal representative is to file an accounting of what you have done with the court. This is where that spreadsheet will come in handy. Your estate administration attorney can help you use it, the statements, and the records of payments to complete the report and close out the probate estate.

Acting as an estate’s personal representative can be hard work. At Harrison Estate Law, P.A., our experienced estate and probate team can help you identify the estate’s creditors, marshall the estate’s assets and identify exempt assets, send out notices, and file the necessary accounting with the court. We will help you protect yourself and your loved ones from creditors, and make sure they don’t get more than they are owed. Contact us here or call 352-306-3579 to get help today.

Categories: Estate Planning
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