How Do I Deal with Creditors as a Probate Executor?

When a loved one passes away, the process is always difficult for those left behind. Often, the decedent has left behind a will that hopefully draws clear plans for what is to be done with their estate according to their wishes. However, the reality is that even with proper planning and a straightforward will, problems can arise during the probate process.

When that happens, it becomes the executor’s responsibility to handle the issues that crop up during the probate process. The executor is the person who the decedent has entrusted with handling their will, and they are usually stated in the will itself. However, the court will appoint one in cases where there is no indicated executor in the will or no will. This is usually a close family member or an individual the deceased party trusts.

This means that the executor is now responsible for settling their estate, including the unfortunate process of dealing with creditors. It can be complicated, so it’s ideal to partner with a legal team like The Hatchett Law Firm, which can work with you to achieve your goals without undue stress and complication in an already challenging life situation.

How Do I Find and Notify Creditors During the Probate Process?

The first step of the probate process is establishing a clear inventory breakdown of the estate’s assets. The personal representative of the estate must also determine the estate’s liabilities. Creditors are included among the liabilities because they are outstanding debts the estate owes.

The personal representative is responsible for notifying creditors of the probate process so that they know the estate’s owner has passed on and that they have a limited time to make any legitimate claims. This can be done by contacting the creditors directly and also via public notice.

The public notice option requires that you publish a notice in a local newspaper after being appointed as the personal representative of the estate. This gives potential creditors notice that the decedent has passed on, provides details of the probate, and provides contact information for creditors to reach you.

Who Counts as a Creditor in the State of Texas?

A creditor is nothing more than a company or individual to whom the decedent still owes money or some financial obligation. That means that creditors can take on many different forms. This is a non-exhaustive list of parties that would be creditors in a probate situation:

  • Credit Cards– any outstanding credit card balances will need to be settled.
  • Auto Loans– any remaining balance on vehicles the decedent owns must be addressed.
  • Mortgage Lenders– if there is a mortgage on their home or property, this also counts as a creditor debt.
  • Government Organizations– outstanding taxes on the state or federal level must also be dealt with here.
  • Banks & Financial Institutions– any lines of credit, loans, or other financial arrangements are considered debt that must be handled.
  • Medical Providers– any unpaid bills for medical providers and suppliers become a debt that must be addressed during probate.
  • Personal Loans– documented evidence of personal loans from other parties also counts as debt; therefore, they can become creditors during this process.
  • Utility Companies– any unpaid gas, electricity, or water bills are included as creditors in probate.
  • Landlords– any outstanding balances for renting properties also become debt included in the probate process.

While these are several more likely creditors, this is only a partial list, as other potential creditors may apply only to specific parties.

What Happens if There Are Insufficient Assets to Cover the Debts?

One of the most stressful parts of the process is when the executor weighs the amount owed against the amount that the estate is valued. Often, they will discover a discrepancy in the amounts, meaning that there is not enough value in the estate to cover the number of creditors and debts that have accrued. In this case, that means the estate is insolvent.

Many executors (and administrators) fear that, since they have been appointed to handle the debts, they are personally and financially responsible for any debts the estate cannot cover. The good news is that, aside from some rare cases of certain debts, it is generally not the executor’s responsibility to make good on the estate’s debts after the owner has passed on.

Generally, the process involved in handling debts goes like this: the creditors are ranked in importance. That usually goes:

  • Funeral and Illness Costs– these are costs incurred by the funeral process and any end-of-life illness issues.
  • Expenses for Administration– these are costs related to executing the probate process itself.
  • Secured Debts– these are debts tied to a specific asset. For example, a mortgage is tied to a home or property.
  • Unsecured Debts– these are debts unconnected to any specific asset. Credit cards, medical bills, and personal loans fall into this category.

The estate’s value is divided, starting with the most important and working its way down the list. If the estate value runs out before the end of the list, then those lower-priority debts are not covered. However, the good news is that generally, the executor is not responsible for settling those, either.

Do I Need an Attorney to Execute the Probate Process in Texas?

There are a few cases in which the estate is clear and straightforward enough that someone could handle it in probate without the assistance of an attorney. However, even in the most straightforward cases, navigating the process is complicated for someone without extensive legal knowledge. That’s why finding a trusted partner in an experienced law firm team is the ideal solution for this challenging situation.

The Hatchett Law Firm can be that trusted and experienced law firm team. Our firm has years of probate experience to help you understand every step of the process and achieve what you need at a difficult time with the least struggle. Call us at 281-771-0560 so we can get started helping you execute your loved one’s probate situation today.