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How E-filed Creditor Claims Affect Probate

Posted on: August 9th, 2016
creditor claimsOne of an executor’s many responsibilities is properly notifying creditors of the decedent’s death. In North Carolina, executors must directly notify creditors they are aware of as well as publish a notice to creditors once per week for four weeks in a publication in the county where the decedent resided. This process is in place to allow creditors an opportunity to collect outstanding balances from the deceased debtor’s estate. 

Many individuals who employ trusts, legal entities, and proper titling of assets as part of their estate planning strategy to minimize or altogether avoid probate may have less cause for concern that their assets will be tapped by creditors. However, if no estate plan was developed or the plan was outdated, estate assets might be diminished or exhausted in order to satisfy creditors’ claims.

While North Carolina law prescribes the procedure that executors must follow pertaining to notifying creditors, creditors themselves have legal powers and limitations for establishing a claim and, if not observed, they might forfeit their rights. (Court intervention might extend this deadline under certain circumstances.) North Carolina law provides that creditors who are directly notified of the debtor’s death have 90 days from delivery or mailing of the notice, if later than the date specified in the general notice to creditors, to make a claim. All other creditors have 90 days from the date of first publication to submit a claim. According to the statutes, if claims occur past this deadline, they will be “forever barred against the estate, the personal representative, the collector, the heirs, and the devisees of the decedent.”

As of this writing, North Carolina does not impose statutory requirements on creditors to e-file their claims. However, some states mandate this practice. For example, a recent probate court issue in Florida—a state that has required creditors to e-file claims since 2013, with some exceptions—highlights how a creditor’s untimely e-filing resulted in the loss of the creditor’s claim in the estate. United Bank v. Edward Frazee involved the bank’s late e-filing of its claim due to its lack of knowledge of Florida’s mandatory requirement to e-file. United Bank’s e-filed claim occurred approximately two weeks after the claim deadline, which resulted in the claim being considered ‘untimely.’ United Bank filed an action with the court about a year later, and the court affirmed that the claim was not timely, which ruling was upheld upon appeal. According to court documents, United Bank’s attorney resides in West Virginia and is also a member of the Florida Bar. The attorney was unaware of Florida’s e-filing requirement and the failure to e-file by deadline was attributed to the attorney’s negligence.

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