How Do You Collect a Debt When Someone Dies?

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If someone who owed you money passed away before paying you back, you’re probably wondering if you’ll ever see your money again. The answer, like much in law, is “it depends.” The good news is that in Tennessee there is a process by which you can try to collect on what you’re owed, and it’s often effective.

Filing a Claim Against an Estate

There are many reasons why you may be interested in collecting against an estate:

  • You own a small business and did work for the deceased person and have yet to be paid
  • The deceased person purchased an item from you and never gave you the money
  • You made a loan to the deceased person during his lifetime
  • You were the kind soul who generously stepped up to pay for the individual’s funeral.

However, it was that the deceased person became indebted to you, it’s actually quite common for someone to pass away before paying you all that they owe.

Don’t let legal terminology scare you aware from trying to collect. Though the word “estate” often conjures images and mansions and vast properties, that’s not what the word means. When someone dies, their possessions, no matter how humble, become known as their estate. After their death, creditors generally have first priority when it comes to obtaining the assets of the estate. So chances are if you are owed money, you have a good shot at collecting that debt.

The Clock is Ticking

In Tennessee, if no estate is opened, a creditor has 12 months after someone dies to file a claim against the estate of the deceased person. However, that deadline is shortened to 4 months or less if an estate is opened.

If no estate is opened, a creditor must file to open the estate itself and ask that a personal representative be appointed to manage the estate. At that point, the creditor can file its claim. Once filed, the creditor’s claim will be processed and presented to the probate court.

How to File a Claim in Tennessee

If an estate is opened, a creditor must file a written claim – in triplicate – with the probate court within the four month creditor period. This creditor period starts on the first date of publication of the “Notice to Creditors” in a local newspaper or by the Court itself. However, if a creditor receives a physical copy of the notice in the mail, the creditor must file their claim with the probate court within 60 days of receiving the notice or they will be barred.

The claim should state that the creditor believes he or she is owed money from the estate and what the basis of that belief is. If there is a contract or written agreement that is relied upon by the creditor, it needs to be attached to the claim filed with the court. Once the claim is filed with the Court, the personal representative of the estate will then need to approve the claim, all or part, or file an exception to the claim.

If an exception to the claim is filed by the personal representative, then the probate court will set a date for a hearing on the merits of the claim. The Creditor must appear to prosecute its claim, or otherwise the claim will likely be denied.

Understand that Tennessee has very strict deadlines for filing a claim against an estate. As such, it should be emphasized, filing a claim is not something you want to take your time doing. The administrator of an estate manages the assets of the deceased person for only a limited amount of time, and during that time they are collecting assets, paying bills, and distributing assets to the beneficiaries. The estate will not stay open forever. Creditors need to make themselves known as soon as possible so that the administrator doesn’t close the estate before paying their claim.

Priority of Payment

Estate executors and administrators have a duty to prioritize claims against the estate. Taxes, funeral costs, court costs, attorney fees, and other administration expenses are usually paid first. People who file claims against the estate are usually put into three categories, in order of priority:

  • Funeral The people who paid for the funeral, burial, or cremation expenses of the deceased get paid first. Why? Because it’s in the public’s interest for the loved ones of someone deceased to dispose of the body properly. It’s grim to think about, but it does make sense.
  • Expenses of administration. This category includes things like appraisal fees, accountant’s fees, lawyer’s fees, court costs, etc. Again, it’s in the public’s interests for a deceased person’s estate to be properly handled, and we want to encourage people to take care of business.
  • Debts of the deceased. Whether it’s a mortgage on a piece of property, a student loan debt, unpaid taxes, an unpaid credit card, or a personal loan—any individual or business that the deceased owed money to (except for funeral or estate administration expenses) falls into this category, though taxes tend to get paid before individuals.

However, all is not lost if the personal representative of the estate files an exception to a creditor’s claim. If an exception is filed, a hearing is then set by the probate court to determine whether the creditor has a right to recover.

If there isn’t enough money left in the estate to pay other claims, creditors can receive a portion of what they’re owed and a liquidation of the estate’s assets, including any real property, will likely be ordered by the probate court to pay the remaining debts.

Help is Available

The process of filing a claim against an estate can be confusing and complicated. A skilled Tennessee probate attorney can guide you through the process and make sure your claim is filed properly, that you don’t miss any deadlines, and that you can collect what you can from the estate. Should you have questions about the process of collecting against an estate call us today.

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