If someone who owes you money dies, what should you do? I know it sounds morbid and I hope it’s not in poor taste but that could be a serious problem. Your next step depends on what you have done so far to collect. In the first of this three part series, we discuss what should be done if you have not yet sued on the debt or obtained a judgment. (We will then cover what happens if there is a lawsuit pending and what happens if you have a judgment). You will need to demand payment against the dead person (decedent’s) estate. However, there are two very important deadlines.
The first deadline occurs after the decedent’s heirs or beneficiaries file with the court to open something called probate. A probate is a special court proceeding to make sure that a decedent’s property is distributed to his or her heirs. It also allows creditors to file claims to get paid from the decedent’s property. If the debtor’s heirs or beneficiaries open a probate estate, then any creditor only has 4 months from the date that an executor is officially appointed to file something called a “Creditor’s Claim” in the decedent’s probate. (California Probate Code section 9100(a).) If the executor accepts the claim, depending on if there are sufficient assets in the estate, the creditor could get paid. (Claims against an estate are paid in a certain order of priority. (Probate Code section 11420.) Unfortunately, general debts are paid last.) If the executor either rejects the claim or fails to do anything within 30 days, then you move to the next step — bringing a suit on the claim. That’s when you come up against the second deadline.
The second deadline is a one-year statute of limitations from the date of death for almost all claims. (CCP section 366.2). That means that if you don’t bring a suit against the decedent’s estate within one year after they die, the claim will be forever barred. That rule applies even if, had the person lived, the statute of limitations would have been longer. So, for example, if the decedent borrowed money from you under a promissory note and failed to pay, the normal statute of limitations is four years. However, if the person dies, you only have one year from their death.
As you can see, when someone who owes you money dies, you need to act quickly so that your claim for money against them doesn’t die too.