Creditor Claims and Debt Resolution
After the inventory and valuation of estate assets is completed, the probate process turns to resolving outstanding debts and creditor claims. This phase is critical, as mistakes can delay probate or expose the personal representative to liability.
California probate law establishes a structured system for notifying creditors, reviewing claims, and paying valid obligations in a legally defined order.
Why Creditor Claims Matter
Creditors have limited legal rights after a death. Probate exists in part to balance those rights with the protection of heirs and beneficiaries.
- Ensures legitimate debts are paid
- Prevents invalid or late claims
- Protects estate assets
- Limits executor liability
Providing Notice to Creditors
Once probate is opened, the personal representative must provide notice to known and potential creditors.
- Direct notice to known creditors
- Publication of notice in an approved newspaper
- Notice to government agencies when required
Important: Creditors who fail to file claims within the statutory deadline may permanently lose the right to collect.
Reviewing and Evaluating Claims
Not all claims must be paid. Each claim must be reviewed for validity and compliance with probate requirements.
- Valid claims — properly documented and enforceable
- Questionable claims — incomplete or disputable
- Invalid claims — expired or unsupported
Improper claims may be formally rejected, triggering a limited window for the creditor to pursue court action.
Order of Payment
California law requires debts to be paid in a specific order of priority.
- Probate administration expenses and court costs
- Funeral and burial expenses
- Secured debts
- Taxes and government obligations
- Unsecured debts
Beneficiaries receive distributions only after valid debts are resolved.
Insolvent Estates
If estate assets are insufficient to cover all debts, payments are made according to statutory priority. Beneficiaries may receive nothing, but heirs are generally not personally responsible for unpaid debts.
Common Mistakes to Avoid
- Paying debts before court authority is granted
- Failing to notify creditors properly
- Paying beneficiaries too early
- Missing statutory deadlines
Practical tip: Never pay a creditor until the claim is confirmed as valid and properly filed.
What Comes Next
Once creditor claims are resolved, the estate may proceed to final accounting and distribution.