How to Handle Creditor Claims in an Independent Administration.
Do you need to pay a creditor?
Well, the easiest way to answer this question is… yes. You should pay the debts. If you don’t want to have to worry about anything in the future, you can pay a creditor and be done with everything. BUT nothing is that easy.
When people ask me that question they usually want to avoid paying a creditor. So, what is the rule?
Well it depends on whether it is unsecured or secured debt and if you are an independent or dependent administrator.
If you are a dependent administrator this video will not address your situation. But alot of the rules are similar so watch if you are interested.
SECURED DEBT
A secured creditor is required to specify the manner in which it wants its claim within the later of six months after the date letters testamentary or of administration are granted, or four months after the date mandatory notice is received. TX Est Code 355.152.
You are required to give notice to a secured creditor
In an independent administration, a secured creditor is held to the same timeline as set forth above to give notice to the independent executor of the creditor’s election to have the creditor’s claim approved as a matured secured claim to be paid in due course of administration.
If the claim is secured by real property, the creditor must record a notice of the creditor’s election in the deed records of the county in which the real property is located. See TX Est Code 403.052.
UNSECURED DEBT
In all administrations, you must file a notice to creditors. THIS NEXT PART IS VERY IMPORTANT. A Notice to Creditors is notice under Sections 308.051 and 308.053. It is a required notice. This notice is done by your attorney and is a notice published in a newspaper of general circulation in the county in which the letters were issued.
The other type of notice is called PERMISSIVE NOTICE. Pursuant to section 403.051, an independent executor “may give the notice to an unsecured creditor with a claim for money permitted under Section 308.054 and bar a claim under Section 403.055;..” The creditor has 121 days to present the claim to the Independent Executor.