Comprehensive, Cost-Effective Legal Services For Creditors

When to resort to litigation when collecting probate debt

On Behalf of | Jun 14, 2024 | Business Litigation

The passing of a debtor can introduce an extra layer of complexity when it comes to collections. As a result of this reality, creditors have to wait to recoup what they’re owed during the probate process.

During probate administration, creditors have a window to file a claim with the probate court. By detailing how much the deceased owed, the estate’s personal representative can pay off these debts before distributing the deceased’s assets to the beneficiaries. However, for some estates, probate administration can be quite time-consuming. When might it be necessary for creditors to resort to litigation when dealing with probate debt?

Initial steps during the probate process

When a borrower still owes some debt at the time of their death, the creditor doesn’t have to count their losses and move on. They can file a claim against the deceased estate to help ensure the executor knows about the outstanding debt. This way, the debts can, hopefully, be settled during probate administration.

Creditors should consider going the extra mile to communicate with the executor and establish a suitable payment plan. To support their claim, creditors can benefit from having pertinent documentation that proves the deceased owed some debt at the time of death. This is especially crucial if the executor initially challenges the validity of the creditor’s claims against the deceased’s estate.

When to consider litigation

Should the executor reject the creditor’s claim even with proper documentation to prove it, litigation may provide the creditor with another way out. By filing a lawsuit against the deceased’s estate, the creditor can let the court enforce their legitimate claim.

Litigation may also be ideal if there are heated disputes over the amount the deceased actually owed at the time of death. With proper documentation, the creditor can allow the court to review the evidence and establish the legitimacy of the claim.

Suppose the creditor has reasons to believe that the executor is mismanaging the deceased’s estate; litigation can be the incentive the executor needs to address the creditor’s claim properly. Litigation can also get an unresponsive or uncooperative executor to engage with the creditor.

Ideally, when a borrower owes debt at the time of death, the administration of their estate should settle any outstanding amounts. However, probate administration isn’t always straightforward, and sometimes, litigation can be an excellent way for creditors to recoup what they’re owed.