Creditors' Claims

When a New York City resident passes away and owes money, the person or entity to whom money is owed is a creditor of the decedent's estate. Creditors may be owed for medical bills, unpaid bills, personal loans, or credit card debt. When creditors properly pursue their claims, they have priority over the rights of beneficiaries to distribution from the estate. The executor or administrator will need to gather assets, pay debts, and distribute any remaining assets. If you're concerned about creditors' claims in New York City, you should consult New York City estate litigation attorney Jules Haas.

When settling decedents' estates, fiduciaries, such as administrators and executors, need to identify and resolve a number of different issues, including creditors' claims. Creditors who wish to pursue money owed must follow the New York Surrogate's Court Procedure Act sections 1802 and 1803. A creditor's claim needs to be written and include a statement of the facts on which it's based, as well as how much is owed.

Under section 1802, a creditor's claim needs to be filed within seven months from the date letters were issued to a fiduciary of the estate. If there's no fiduciary in place, that time period won't count as part of the seven-month window. When a creditor misses this period within which to make claims, the fiduciary won't be accountable for assets and moneys that might have been paid in good faith in satisfaction of a lawful claim or prior to presentation of the claim.

Fiduciaries can require a creditor making a claim to provide an affidavit attesting to the amount of the claim that is justly owed and any payments made that were credited. The affidavit can specify the claimant doesn't know of offsets and has no security, other than what's described in the affidavit.

The fiduciary must file an instrument that sets forth an address of domicile. It should designate the clerk of court to receive service of process if the fiduciary is not able to be located and served. A copy of a creditor's claim should be addressed and delivered to the fiduciary of the New York estate at the designated residence with a return receipt requested. A creditor won't be able to enforce payment of a claim if the claim isn't presented in accord with these rules.

Once a creditor's claim has been appropriately presented, a fiduciary has 90 days to accept or reject the claim. If the fiduciary accepts the claim, he or she will pay the claim. A fiduciary should provide written notice to a creditor that specifies the reasons for the rejection. When a fiduciary doesn't allow the claim within 90 days from the date of presentation, the claim is deemed to have been rejected.

If a fiduciary has reason to question the validity of the claim or knows that a creditor's claim may be asserted, and yet no notice was presented, the fiduciary can petition the surrogate's court under Surrogate's Court Procedure Act 1809 to determine whether the claim is valid and enforceable. In the same way, if a creditor's claim follows procedural requirements but is not allowed under section 1806, the creditor can petition the court. The petition will need to set forth the factual background and ask that the court require the fiduciary to show cause why the claim shouldn't be allowed. If you have questions about presenting a claim to an administrator or executor, seek a consultation with an experienced estate litigation lawyer.

When a creditor's claim is greater than $10,000 or amounts to 25% or greater of the estimated gross probate estate, an answer should be filed within 8 days by anybody whose rights or interests would be affected if the claim is allowed. The fiduciary has an opportunity to reply to this answer within five days.

The court is empowered to make a decision about both the claim and any related issues as a first step in an accounting proceeding.

Whether you're a creditor making a claim or a fiduciary aware of your tremendous responsibilities, it's important to seek legal representation. If you are concerned about creditors' claims in New York City, experienced lawyer Jules Haas may be able to counsel and represent you. Mr. Haas has handled New York City estate litigation for more than 30 years. He provides a free case review and offers reasonable fee arrangements. His clients live in Manhattan, the Bronx, Queens, Kings, Richmond, Nassau, Suffolk, and Westchester Counties, and throughout the United States. Call him at (212) 355-2575 or contact us through our online form.