Creditors of the Dead: Responsible Handling of Debts in Estate Administration
When a loved one dies, things change. There are many new details to handle and decisions to make all with the overlay of the emotions that naturally accompany the human reconciliation of death. For the person charged with administering a deceased person’s estate (typically called an Executor if the decedent died with a will or an Administrator if the decedent died without a will) there are multiple legal obligations that must be met. One key obligation is assembling and paying legitimate debts of the estate. It is not uncommon for an administrator to be contacted by creditors and persons who have questionable or no legal standing or authority to receive money from the estate. And in these cases the Executor/Administrator must do due diligence to determine which debts must be paid so that any estate funds or property which properly belong to the heirs or beneficiaries remains in tact.
In North Carolina there are specific rules on review and payment of claims against an estate. In the event a potential creditor has sent written notice of a claim of right to payment for a debt of the deceased be sure the potential creditor has the proof needed to substantiate the claim. If the sender is the original creditor they should be able to produce a copy of an agreement or contract signed by the decedent as well as an itemized statement of all charges due. It may be neccesary for the Executor/Administrator to send a debt validation request letter to the potential creditor and provide a time frame for a written response. If the potential creditor is a collection agency or debt buyer they may have limited documentation but they still have the legal burden to establish the debt is valid and was owed by the decedent and that they have the legal right to collect on the debt.
Even if the potential creditor presents what appears to be a legitimate claim for payment of a debt there are defenses that may prevent payment of the debt. These defenses include:
- Failure to produce an agreement or contract signed by the decedent
- Expiration of the relevant statute of limitation
- Insufficient documentation of assignment or right to collect on debt
- Insufficient documentation of the balance due and how it was calculated
- Payment in full or other satisfaction of debt
- Minor or incapacity
- Servicemembers Civil Relief Act
North Carolina law sets forth a priority of payment of claims against the estate. Typical consumer debt (ex: car loan, credit card) has the lowest rung on the payment ladder. An Executor/Administrator can dispute a presented claim and the potential creditor’s failure to commence an action on the claim within three months of the notice of rejection serves as an absolute bar to legal action to recover the claimed debt.
An Executor/Administrator is required to handle estate matters expeditiously and with due regard to the preservation of the estate property in the best interest of all persons interested in the estate. Payment of illegitimate debts or other failure to fulfill the duties of administering the estate can lead to the Executor/Administrator being removed from office and held personally liable for losses to the estate. Aggressive and illegal debt collectors can subject themselves to legal liability by the Executor/Administrator on behalf of the estate. This legal liability can mean a lawsuit and/or monetary damages payable to the estate. If you are an Executor/Administrator in need of assistance with the handling and payment of claims against an estate consult a consumer law attorney preferably one with experience in debt collection defense.