Claims Against the Estate

1. Claims Against the Estate

2. PR gives notice to creditors • [already covered]

3. Presentment by Creditor -- Generally • Creditor must file a claim: • With PR or court, and • PC §§ 298, 308 • EC §§ 355.001, 355.002 • With supporting affidavit (under oath) containing statutory elements. • PC § 301 • EC § 355.004

4. Claims Against the Estate[continued]

5. Which claims need to be presented? • Must present claim “for money” and have it rejected before creditor can receive a court judgment. • PC §§ 314 • EC §§ 355.065 • Unliquidated claims do not have to be presented. • Question 5 – p. 151

6. Time of Presentment • General Rule – Any time before: • Estate closed, or • Statute of limitations runs • PC § 298 • EC §§ 355.001

7. Time of Presentment • Exception for unsecured creditor who received notice • 4 months after receipt of notice (PC § 298) • 120 days after receipt of notice (EC § 355.060)

8. Secured Claims • Types of Claims • Mortgage • Deed of trust • Article 9 secured interest • Creditor has choice of how to proceed.

9. Secured Claims • 1. Preferred Debt and Lien Against the Collateral • PC § 306(d) • EC § 355.154 • CR gets top priority over the collateral, now and later in the hands of purchasers, heirs, and beneficiaries. • But, no right to deficiency if undersecured. • Presumed if no timely election.

10. Secured Claims • 2. Matured Secured Claim • PC § 306(c), (c-1) • EC § 355.153 • CR must subordinate claim to: • First $15,000 of funeral and last illness expenses • Family allowance • Administration and other estate expenses • But, may recover deficiency from other estate assets. • Must be timely elected.

11. Secured Claims • If creditor elects matured secured claim status, creditor can get paid now even though debt is not yet due. • Why is this permitted? • How does a creditor make the decision?

12. Secured Claims • Time for Creditor Election • Later of: • Four months after receipt of notice, 0r • Six months after letters issued.

13. Action of PR on presented claims • Timing • Must act within 30 days. • PC § 309 • EC § 355.051 • Three options

14. Action of PR on presented claims • 1. Accept • PR agrees that the claim is valid. • Does NOT mean claim will get paid (might not be enough property in the estate).

15. Action of PR on presented claims • 2. Reject • PR states PR will not pay the claim (thinks it is bogus). • Creditor must file suit with 90 days of rejection or else claim is barred. • PC § 313 • EC § 355.064

16. Action of PR on presented claims • 3. Do nothing • Claim is deemed rejected if PR does nothing within 30 days • PC § 310 • EC § 355.052 • Warning to creditor: This starts the running of the 90 day period to file suit. • Ethics of advising PR to do nothing to “trick” non-savvy creditors?

17. Claims Against the Estate[continued]

18. WARNINGS for Independent Administration • The following rules do NOT apply: • No requirement with respect to form in which creditor must present claim (affidavit not needed). • No requirement that claim be presented before suit. • 90 day period for suing on rejected claim does not apply.

19. Lusk v. Mintz – p. 152

20. When are claims paid? • 1. When administration completed • 2. As administration progresses • 3. When creditor obtains court order after one year from issuance of letters • PC § 320 • EC § 355.107

21. Order of Payment of Claims • Authority • PC §§ 320 & 322 • EC Chapter 355, Subchapter C • Other provisions may also impact the claim order.

22. Order of Payment of Claims • 1. Federal Tax Lien [and other federal claims] • Exceptions from Rev. Rul. 80-112 • Funeral expenses • Family allowance • Administration expenses • What is the policy behindthese exceptions?

23. Order of Payment of Claims • 2. Secured Creditor with Preferred Debt and Lien • How obtain? • Timely election. • Failure to elect timely. • Priority is only over the collateral. • No ability to seek deficiency if under secured.

24. Order of Payment of Claims • 3. Homestead(or allowance in lieu)

25. Order of Payment of Claims • 4. Funeral expenses and expenses of last illness up to a combined total of $15,000

26. Order of Payment of Claims • 5. Exempt personal property (or allowance in lieu)

27. Order of Payment of Claims • 6. Family Allowance x

28. Order of Payment of Claims • 7. Administration and related expenses

29. Order of Payment of Claims • 8. Secured creditor who elected matured secured claim status • This priority is for amount that can be realized from the collateral. • Deficiency has a lower priority (#13).

30. Order of Payment of Claims • 9. Delinquent and future child support

31. Order of Payment of Claims • 10. Certain Texas tax claims

32. Order of Payment of Claims • 11. Confinement claims • But not if convict had: • Surviving spouse, • Dependent minor child, or • Disabled child.

33. Order of Payment of Claims • 12. Medicaid Recovery

34. Order of Payment of Claims • 13. Unsecured claims

35. Order of Payment of Claims • 14. Beneficiaries and Heirs • Following the abatement order

36. Order of Payment of Claims • Hope v. Baumgartner (p. 157)

37. Claims after estate distributed • Creditor may seek recovery from heirs, beneficiaries, and lower-ranked creditors up to amount received from the estate. • Exceptions: • Claim barred by statute of limitations • Claim barred by the “non-claim” statute