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Working with Creditors

Notice to Creditors

As personal representative (or administrator), you are responsible for ensuring that all of the decedent’s debt are dealt with. There are different ways to satisfy this duty. A personal representative may, but is not required to, publish a Notice to Creditors in a legal newspaper in the county where the person resided at the time of death. The language that the Notice should contain can be found in RCW 11.40.030. A sample Notice to Creditors is contained here (PDF) (Word). The Notice must be published once each week for three consecutive weeks. If you publish a Notice to Creditors, any claimant must respond with a Creditor Claim no later than four months after the first publication, or 30 days after you send the Notice to Creditors directly to the potential creditor, whichever occurs last. Because the statute of limitations for bringing claims against a deceased person is two years, it is unnecessary to publish a Notice to Creditors if the decedent has been dead for more than two years. 

Reasonably Ascertainable Creditors

It’s not enough to just publish the Notice to Creditors. Once appointed, you must also conduct a search to try to locate all “reasonably ascertainable creditors.” This search should include a review of all of the financial documents that are available, including financial statements, loan documents, checkbooks, bank statements, and income tax returns of the decedent. You should also look through all mail and correspondences, including mail received after the date of death. Once this is accomplished and before closing the probate, you should file with the court a Declaration describing your due diligence in trying to identify the creditors of the decedent (PDF) (Word). The filing of this Declaration creates a legal presumption that you have conducted a reasonable search for all creditors. RCW 11.40.040. As a result, if an unknown creditor emerges later, that creditor will need to rebut that presumption to get paid.


Where to Publish in Pierce County:

The Tacoma Daily Index is a common publication used in Pierce County for these notices. Notices should be emailed to legals@tacomadailyindex.com. They prefer the Notices to be in Word format. Include instructions to publish once a week for three consecutive weeks, and include a billing address and phone number. You can call 253-627-4853 for more information. The charge for publication is currently $126.90 if you send the Notice to them as a Word or text document via email.

Where to Publish in King County:

The Daily Journal of Commerce is a common publication used in King County for these notices. The Notice should be sent to legals@djc.com with instructions on how often to publish (i.e., once each week for three consecutive weeks), along with payment information. The DJC can also be reached at 206-622-8272. The charge for publication is currently $117.


What if you get a Creditor Claim?

If you get a Creditor Claim, you should first ask whether the claim is valid. Did the decedent actually incur the debt? Is the full amount of the debt owed, or a lesser amount? If at least some of the debt is owed, then look to whether the claimant filed the Claim with the court no later than the end of the 4 month creditor claim period, and whether the Creditor Claim you received was postmarked no later than the 4 month period. If the claimant failed to meet this timeline, then you can ignore the claim.

If the Creditor Claim is valid and the creditor met the 4-month deadline, you should pay the debt and be sure to get a Release of Claim from the creditor, which you or they should file with the court. If you reject the claim, the claimant must file suit against the estate within 30 days to preserve the claim. Note that the claimant must file an ordinary civil action, not a petition under chapter 11.96A RCW (TEDRA). See Sloans v. Berry, 189 Wn. App. 368 (2015).  Often even valid creditors will not file suit within 30 days, but if they do, be ready: The court can require the estate to pay the creditor’s attorney’s fees for your rejection of a valid claim. A Notice of Rejection of Creditor's Claim can be found here (PDF) (Word). Be sure also to file with the court proof that you mailed the Rejection, which can be found here (PDF) (Word). 

Creditor Claims of Less than $1,000

If you receive a properly mailed and filed Creditor Claim that is less than $1,000, you should quickly consider whether it is a valid claim. If you fail to reject the claim within the later of six months after publication or two months from receipt of the claim, it is automatically accepted. RCW 11.40.090(2)

Mail the Notice to Creditors to DSHS

If you choose to publish a Notice to Creditors, you must send a copy of the Notice to the Office of Financial Recovery at the Washington State Department of Social and Health Services (DSHS). RCW 11.40.020(1)(d). You should include the decedent's social security number in a cover letter to DSHS. The address to that agency is currently: PO Box 9501, Olympia, WA 98507-9501. Then you must file a Declaration of Mailing with the Court swearing under penalty of perjury that you have done this (PDF) (Word).

What to do with bills you find?

If you find valid bills that were incurred by the decedent before death, you have a couple options. You can pay the debt or try to negotiate with the creditor. You can also send the Notice to Creditors directly to the creditor. If you do this, and the creditor does not respond by filing a Creditor Claim within the 30-day period required by RCW 11.40.051 (or within 4 months after the first publication, whichever is later), you can ignore the debt. Some lawyers encourage clients to collect all of the pre-death bills and mail each of the creditors a Notice to Creditors 30 days before the expiration of the 4-month creditor claim period. This way, the creditors have only 30 days to get their act together and file a Creditor Claim. Some will miss the deadline. Most credit card companies however will have already filed a Creditor Claim before that last 30-day window.


From which assets to pay creditors?

Washington’s “abatement statute” governs which assets pay the debts of the decedent. Chapter 11.10 RCW. That statute provides that debts are—absent contrary directions in a will—first paid by the residue of a person’s estate, or if there is no will, the intestate estate. If however the residue or intestate estate is insufficient to pay those debts, general bequests must pay for the debts, followed by specific bequests. General bequests are gifts of particular things in quantity, such as a set sum of money (e.g., “To my daughter, I give $5,000”). Specific bequests are gifts of particular things, such as a car or a specific bank account. Nonprobate assets are generally regarded as specific bequests. RCW 11.10.040.

Usually the question of which assets are used to pay the debts of a decedent is not difficult. Take for instance a typical situation where a mother’s will leaves all of her assets to her children equally. And, assume there are plenty of assets to pay her minimal debts. In this situation, the personal representative will pay the mother's bills from the general assets of the estate before final distributions are made to her children. So, essentially, each child’s inheritance will be reduced by an equal amount to pay for the debts.

Assume however that the mother has a lot of debt, as well as a house and a bank account where she designated her daughter as joint account holder with right of survivorship. Absent contrary instructions in the mother’s will, the personal representative will have to use the proceeds from the sale of the house to pay the debts first. But if those assets are insufficient to pay the debts, then the personal representative will need to demand that the daughter contribute towards the payment of the debts with the money she received from the bank account.

What if the personal representative is a creditor of the estate?

If you are administering the estate and the decedent owed you money, you are a creditor of the estate. If you wish to get paid, you must follow the same rules as any other creditor (i.e., serving or mailing a Creditor Claim to yourself as the administrator and filing the claim with the court). However, the law also requires you to go one significant step further: You are required to have your claim reviewed and approved by the court. RCW 11.40.140.  This is a bit of a hassle because the law requires you to file a petition under the Trust and Estate Dispute Resolution Act (TEDRA), Chapter 11.96A RCW. To bring such an action, you will likely need a lawyer because the steps under TEDRA can be complicated and confusing. You will also need to file the action under a separate cause number and pay another filing fee. 

What types of debts are not covered?

The creditor claim process does not protect the estate against all debts. First, if a claim arises after death, the personal representative cannot use the creditor claim process to avoid the claim. This includes such expenses as funeral costs and estate taxes.

Another important exception to the creditor claim process is a debt that is secured by property, such as a mortgage. RCW 11.40.135. A personal representative cannot file a Notice to Creditors, mail it to a mortgage company, and then expect to wipe out the mortgage when the mortgage company fails to file a claim. Rarely will a personal representative receive a creditor claim from a mortgage company. These companies know that their debts are secure. Such secured creditors however cannot receive more than the value of their security interest unless they file a timely creditor claim.

In addition, if a claim can be satisfied by liability insurance (like if the decedent had an auto accident that can be paid from insurance), then the claimant need not bring a claim within the four-month claim period. That claimant can bring the claim any time as long as the claim doesn’t violate any other statute of limitations. RCW 11.40.060. The claimant however cannot receive more than what was covered by the insurance without filing a timely claim.

Creditors Versus Estate Expenses

It’s important to understand the difference between creditors and estate expenses. Creditors are persons or companies that the decedent owed money before the date of death. These are “creditors” subject to the creditor claims rules described above. Estate expenses are different. Estate expenses are incurred by the estate after the date of death, such as funeral expenses and attorney fees. These types of debts are not subject to the creditor claim process. Therefore sending a Notice to Creditors to these persons or companies will not be effective. Estate expenses must be dealt with before the estate is closed.