Debtors and Probate: What Not to Do

Debtors and Probate: What Not to Do

The financial pressures amid the pandemic are considerable, and seem likely to intensify. Potentially distracted creditors who need to pursue claims against a recently deceased debtor need to be familiar with an inflexible probate law that could cost them their claims.

Probate Section 366.2 sets the one-year mark from the date of death for most creditors to assert their claims against a deceased debtor. Given the increased general strain, spike in deaths, and extensions being offered in other areas of law, one might expect that some rules establishing temporary exceptions would have been implemented.

But that’s not the case. Most courts remain open, at least for receiving filings, and the policy aimed at bringing finality to the administration of a deceased person’s affairs is a strong one. In the vast majority of cases, if you fail to properly assert your claims in time, they will be time-barred—forever.

Read more of Scott Rahn’s thought leadership.

With all this in mind, I’ve distilled the dense and confusing Section 622.2 to three simple but major “don’ts.”

1. Don’t Wait to Pursue Your Claim

Creditors need to be on the front foot when it comes to pursuing their claims. As noted above, there are no pandemic exceptions to the rule, even if a creditor is unaware of the debtor’s death. There is always a possibility that in some situations the courts may equitably toll the statute, but each case will be examined on its own facts.

While probate courts sit in equity, it’s ill-advised for any creditor to fail to timely pursue a claim in the hopes that a court might later find their circumstances sufficiently sympathetic so as to equitably toll the one-year statute.  

2. Don’t Remain Idle Once Your Claim Is Rejected

Should the executor of the debtor’s estate reject a creditor claim, it’s important that creditors file their civil action within 90 days of receiving the rejection. If you don’t quickly file your civil action after the creditor claim is rejected, your claims will be time-barred. 

Once the creditor’s claim is filed with the court and served on the personal representative, you’ve likely done all that needs to be done in the immediate term. The case Estate of Holdaway, E070918, (2019, Cal. App. 4th) is instructive on how the process and timing work.

To comply with the filing and service requirements pertinent to a creditor claim, you must file your claim with the court and serve the claim on the personal representative. 

Following the 2013 death of Richard Holdaway, Patricia Everett filed a probate petition seeking repayment of sums she contended Holdaway owed her. When filed, the claim was timely and tolled the statute of limitations for actions against a decedent under Section 366.2.

Holdaway’s son, in his capacity as personal representative of the estate, rejected the claim. Everett subsequently filed a complaint for damages on a rejected creditor’s claim in San Bernardino County probate court, but the court sustained the executor’s rejection without leave to amend.

On appeal, Everett challenged the trial court’s decision to sustain the demurrer without leave to amend before the Fourth Appellate District. The appeals court, reversing the decision, found that Everett had filed her claim in a timely manner, and that the trial court had erred in its judgment. 

Learn more about RMO Lawyers’ approach to probate.

3. Don’t Be Afraid to Open the Probate as the Creditor

To comply with the filing and service requirements pertinent to a creditor claim, you must file your claim with the court and serve the claim on the personal representative. Where no personal representative has been appointed, you need to initiate probate. As a creditor, you have standing to open the probate and seek appointment as administrator. If appointed, you will file and serve yourself. Most frequently the filing forces the debtor’s family to seek appointment rather than allow the creditor to take control of the estate. Either way, you will have someone upon whom you can serve the creditor claim.

In situations where the one-year statute has already passed, the creditor would be well-advised to seek the advice of probate litigation counsel as soon as possible to determine whether an equitable tolling argument should be advanced so that it can be filed as soon as possible.

In short, it’s important to get the ball rolling and keep it rolling. The financial and emotional toll of the pandemic has been considerable, but a probate court judge is unlikely to consider that a mitigating factor should you fail to file properly and in a timely fashion.


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