January 04, 2021

How Do Creditors Affect My Estate When I Pass Away?

One of the reasons people try to avoid probate in Florida is because the probate process provides the deceased person’s creditors with an open forum to bring claims against the decedent’s estate.

In a typical probate administration, a Personal Representative is appointed by the court to handle the affairs of the deceased individual. Once the Personal Representative is appointed, a Notice to Creditors must be published before the estate can be closed. In South Florida, most Notice to Creditors are published in the Daily Business Review.

After the Notice to Creditors is published, the 90 days creditor period begins. Therefore, it is a good idea to publish the Notice and start the creditor period as soon as possible. Some counties, such as Miami-Dade, make it very difficult to make any distributions from the estate until the creditor period has expired.

During the 90 day window, potential creditors must present themselves by filing a Creditor Claim in the probate court. There is no charge for a Creditor to file a claim. Once a claim is filed, the Personal Representative, through their counsel, has no more than four months to respond to the claim. The claim can either: (1) be paid in full; (2) negotiated between the parties to a lower amount; or (3) be objected to by the Personal Representative. If the claim is objected to, then the objection must be sent to the creditor via certified, return receipt mail. The creditor would then have 30 additional days to file a lawsuit against the estate. If the creditor fails to file a lawsuit, then their claim could be stricken or ignored by the court.

If there are any known creditors of the decedent’s estate, then the Personal Representative is required to directly provide them with a copy of the Notice to Creditors.

Eight classes of creditor claims in Florida

Florida Statute 733.707 lists the eight classes of creditor claims. All claims within a numbered class must be paid before claims from any higher classes. The lower the class, the greater the likelihood of the creditor getting paid from the estate. The eight classes for probate creditors are:

  • Class 1: Costs, expenses of administration, compensation of the Personal Representative and compensation for the Personal Representative’s attorneys’ fees, along with any other attorneys’ fees awarded under statute.
  • Class 2: Reasonable funeral, interment, and grave marker expenses, not to exceed the aggregate of $6,000.
  • Class 3: Debts and taxes with preference under federal law and claims pursuant to Medicaid and Public Assistance.
  • Class 4: Reasonable and necessary medical and hospital expenses of the last 60 days of the last illness of the decedent, including compensation for persons attending the decedent.
  • Class 5: Family allowance.
  • Class 6: Arrearage from court-ordered child support.
  • Class 7: Debts acquired after death by the continuation of the decedent’s business, but only to the extent of the assets of that business.
  • Class 8: All other claims, including those founded on judgments or decrees rendered against the decedent during the decedent’s lifetime, and any excess over the sums allowed in earlier classes.

The majority of credit card companies are Class 8 creditors, which means they stand in the lowest position against everyone else.

Certain creditors, such as mortgage companies and car lease/loan companies, can seek return of the underlying assets through repossession or foreclosure proceedings, even if they do not file a claim through the probate court.

Lastly, there is a two-year statute of limitations for creditors. Many times, individuals will wait to open a probate administration until the two-year term has expired. If a deceased person has been dead for more than two years, then the decedent’s creditors are barred from filing a claim.

Dealing with creditors can be tedious and difficult. It is best to consult with a professional to determine the best course of action.

Contact Revis, Hervas & Goldberg P.A.

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