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Collecting a Debt After the Debtor Dies

Posted Tuesday, August 26, 2014 by John S. Palmer

Asserting a claim against a decedent’s estate can be complicated. That is because a claimant must be aware of both the statute of limitations and statutes that control how claims against an estate must be handled.

Washington’s general statute of limitations is RCW Chapter 4.16 and establishes the deadline for filing suit for various types of claims, including breach of contract (both oral and written) and tort. There are also specific statutes of limitation; for example, RCW 11.96A.070 establishes deadlines for filing claims involving trusts and estates under Washington’s Trust and Estate Dispute Resolution Act (TEDRA).

However, after a debtor dies, RCW Chapter 11.40 requires the personal representative of the estate to publish a notice in a local newspaper informing creditors of their right to file a claim against the estate, how the claim may be presented, and the filing deadline; the notice may also be sent directly to creditors. The deadline for filing a claim varies from 30 days to 24 months, depending on whether the creditor is known (or “reasonably ascertainable”), and whether the creditor receives actual notice of the right to file a claim.

If the claim is rejected, the creditor then has 30 days to file suit against the personal representative. Both the deadline for filing a claim, and the deadline for filing a lawsuit if the claim is rejected, must be strictly adhered to, or the claim will be barred. Additionally, a suit must also still be filed before the statute of limitations expires, or it will be barred.

The creditor’s claim procedure can be confusing; errors are common, and may result in loss of the claim. For example, a creditor generally must file a claim with the estate and give the personal representative an opportunity to accept or reject it before filing suit. In Cloud v. Summers (1999), a lawsuit filed by an alleged adult victim of childhood sexual abuse and his parents was dismissed for failing to first file a claim with the estate of the alleged (and now deceased) abuser. The plaintiffs argued that they had substantially complied with the claim statute by serving the lawsuit on the estate within the deadline for submitting a claim, but the Court of Appeals said that filing suit “is not an acceptable substitute for filing a creditor’s claim as required by RCW 11.40.”

In just the past two months, the Court of Appeals has issued two more decisions relating to the creditor’s claim statute. In Estate of Henington (decided July 22, 2014) the court held that the mere filing of a creditor’s claim against an estate does not toll the statute of limitations that applies to the claim. Henington involved 3 creditor’s claims filed by the decedent’s father. The personal representative neither accepted nor rejected the claims, and the claimant did not file suit; after 4 years of inaction by either party, the trial court ruled that suit was now barred by the statute of limitations and dismissed the claims. The Court of Appeals held one of the claims, for under $1,000, was deemed to be allowed by RCW 11.40.090(2) and instructed the trial court to take a closer look at whether the statute of limitations had actually expired for the other two claims.

Most recently, in Estate of Molck (decided August 18, 2014) the creditor filed a proper creditor’s claim, which was rejected. He then sought to enforce the claim by filing a petition under the probate case number as an action under the Trust and Estate Dispute Resolution Act (TEDRA). The trial court dismissed the petition on the grounds that RCW 11.40.100(1) requires filing a separate civil action under a different case number. The Court of Appeals agreed, noting that precedent dating back to 1910 requires a creditor to file an ordinary civil action that is not part of the probate proceeding after a claim is rejected.

While these cases may seem unduly harsh, the law requires strict adherence to the claim procedure to permit estates to be administered and closed in a timely manner. Because the rules can be confusing, and a procedural error can result in loss of a valid claim, claimants should consider hiring an experienced probate attorney, particularly if there is any doubt the claim will be paid, or the applicable statute of limitations may expire.

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Law Office of John S. Palmer11911 NE 1st St, Ste. B204,Bellevue, WA 98005-3056