Notifying and paying creditors are central parts of the Colorado probate process. In fact, Colorado probate code establishes very specific rules for how and when an estate’s personal representative should notify and pay creditors. Understanding how these rules work and affect you can be essential to:
- Avoiding allegations that you have breached your fiduciary duty if you are a personal representative
- Protecting your rights and interests, if you are a creditor, an heir, or a beneficiary
When you need help with creditors in probate, you can turn to Colorado Springs Probate Lawyer Tammy W. Akers. She has more than 35 years of experience protecting her clients’ rights throughout the probate process—and she’s ready to provide you with crucial guidance and exceptional representation every step of the way.
Call 719-323-6421 or to schedule your free, confidential consultation.
We invite you to contact our firm whenever you need clear answers about your rights and probate case. We also encourage you to check out the following FAQs, which share some helpful information to commonly asked questions about creditors in Colorado probate.
Can a Creditor File Probate?
In Colorado, probate cases start when the will is filed with the probate court. This filing is typically done:
- In the county where the decedent lived: Here is a list of the Colorado courts by county.
- By someone with access to the will: This usually includes a surviving spouse, a parent, a child, or another loved one. It could also include another designated personal representative, like an attorney.
Once the will has been filed and the probate case has been opened, the personal representative will have to notify the creditors and other interested parties (like heirs and beneficiaries). So, while creditors are part of Colorado probate, they do not initiate these cases.
What Is Creditor Probate?
“Creditor probate” is not a legal term, nor does it accurately describe the probate process and how creditors are involved. Once creditors are notified of a probate case, they can become involved if they file a debt claim against that estate within the required time frame.
Who Are the Creditors of an Estate?
The creditors of an estate can vary widely, from individuals and businesses to national corporations and even the government. Some examples of estate creditors include:
- Credit card companies, looking for payment of outstanding card balances
- Funeral homes with bills to cover the services for laying someone to rest
- The Internal Revenue Service (IRS), seeking past-due taxes and/or penalties
- Hospitals and health care providers, looking for payment on outstanding medical bills
- A surviving spouse and/or dependents with a family allowance claim
- Creditors for any business(es) the decedent owned, seeking the payment of business debts
Do Creditors Get Paid First in Probate?
Creditors who have valid debt claims against the estate will generally be paid first—before any assets are distributed to the heirs and beneficiaries. Keep in mind that there may be exceptions to this rule.
How Much Time Do Creditors Have to Collect After Death?
Creditors usually six months to file claims with an estate. While this time frame is intended to provide ample opportunity for all potential creditors to come forward, it also offers personal representatives time to:
- Inventory the estate: Depending on the size of the estate, this could include business assets, multiple homes, assets in other countries, and more.
- Appraise the assets of the estate: Typically, all non-cash assets that are subject to probate will have to be appraised. Depending on what these assets are, this could require personal representatives to take the extra step of finding and hiring special experts, like art collectors, jewelry appraisers, and others.
- Negotiate with creditors: Some creditors may be open to accepting less than the full face value of their debt claim. This can be especially true if creditors would rather collect a reduced payment, close the claim, and move on, rather than spend more money fighting for every last dollar (and possibly not getting it). So, personal representatives may want to try negotiating down valid debt claims, when possible.
Once the six-month period has ended, creditors can lose their rights to seek debt payment from the estate.
Here, it’s important to understand that:
- Some creditors may be more aggressive than others when seeking payment from an estate.
- Not all claims filed with an estate are valid. So, carefully evaluating each one is necessary to knowing which are valid (so that only those are paid).
- Paying some claims before others are submitted can cause problems, like allegations of breach of fiduciary duty.
Reduce the risk of problems with creditors in Colorado probate by evaluating debt claims and only paying debts when all claims have been submitted.
Can Personal Items Be Used to Pay Creditors in Colorado Probate?
Generally, the assets of an estate are used to satisfy that estate’s debts as part of the probate process in Colorado. To that end, it may be necessary to liquidate the decedent’s personal assets of value that are now part of the estate. This could include (but is not limited to):
- Stocks and bonds
- Real estate and homes
- Jewelry and valuable collections
- Automobiles and boats
- Bank account holdings (if those accounts don’t have designated beneficiaries)
Please be aware that:
- If an estate has enough funds to cover its valid debts, the estate’s holdings that include the decedent’s personal effects do not have to be liquidated.
- If the valid debts for an estate exceed its assets, the estate will be considered to be insolvent. In these cases, part or all of the intended inheritance may end up going to creditors, instead of the beneficiaries named in the will.
- If an estate is insolvent, there may still be other assets not included in probate, like retirement accounts and assets held by trusts, that beneficiaries can still inherit.
Need More Answers About Creditors in Colorado Probate? Contact Colorado Springs Probate Lawyer Tammy W. Akers
Dealing with creditors can be just one of the complicated elements of the probate process. Whether you’re a personal representative, an heir, or a beneficiary, you likely want to this step of the process to go right. More than that, you may want to see the entire probate case be resolved as efficiently and favorably as possible.
When that’s the case, it’s time to contact Colorado Springs Probate Lawyer Tammy W. Akers. Since 1984, she has been dedicated to:
- Helping her clients navigate the complexities of Colorado probate
- Providing compassionate, responsive service throughout the process
- Working diligently to seek the best possible resolutions
Call 719-323-6421 for important answers about your rights and clear advice about your probate case. Initial consultations are 100% free and confidential.
With Colorado Springs Attorney Tammy W. Akers in your corner, you can be confident that you have experienced representation and a true ally going the extra mile for you. Along with probate, Attorney Tammy W. Akers also represents clients in estate planning and family law matters.