What is a notice to creditors?
The notice to creditors is a public notice generally posted in a local newspaper by a trust or executor as part of the probate of the estate of a deceased person. The notice serves as an official notification to creditors and debtors of the probate of a deceased person’s estate and may last for several weeks depending on state laws.
The executor – in some states known as the personal representative – is responsible for paying unpaid debts and collecting money owed to the estate in the course of his or her duties after being appointed by the court.
Key points to remember
- A notice to creditors is a public statement noting the death of a person in order to alert potential creditors of the situation.
- Still published in local newspapers, the notice is filed by the executor of the succession and aims to facilitate the probate procedure.
- Creditors will have a limited time to respond to the notice, which can also be filed by people declaring bankruptcy.
How a notice to creditors works
In the United States, when a person dies, there is usually at least one informal probate process for the estate of the deceased. The term “avoid probate” refers to the strategy of arranging the transfer of assets without probate through trusts, joint accounts or other means such as life insurance. Some states have an asset threshold that allows small estates to avoid probate, but if an interested party objects, there are assets that require probate, or other problems exist, a probate file will be open.
According to state law, once probate is opened, creditors generally have a limited time from the date they were informed of the testator’s death to file claims against the estate for money. to them. Claims that are rejected by the executor can be brought before a court where a probate judge will have the final say as to whether the claim should be paid or not. Even though newspapers have given way to digital and online media, they are still the most used medium for sending notice to creditors.
Notice in bankruptcy proceedings
A notice to creditors is also filed for bankruptcy procedures. In the event of personal bankruptcy, the notice is filed before the first meeting of creditors, known as the 341 meeting. Persons filing for bankruptcy under Chapter 7 or Chapter 13 must attend this meeting with the trustee in bankruptcy and creditors may also attend and ask questions.