What happens when a debtor passes away before the creditor can obtain a judgment and collect? Filing suit within the applicable statute of limitations, and thus preserving the creditor's claim requires a timely filing of a lawsuit against the appropriate defendant. In a case where the defendant is deceased, doing so requires compliance with statutory procedural requirements.
If the judgment debtor dies prior to satisfaction of the judgment debt, the probate code becomes the governing code for enforcement of the judgment debt (Code of Civil Procedure Section 686.020). The statute of limitations for filing a claim against an estate is a strict one year from the date of the debtor's death (pursuant to California Code of Civil Procedure Section 366.2). This limitation period applies regardless of whether the judgment creditor knew the judgment debtor had died! The only exception to this absolute bar is when equitable estoppel (or a specific statute) applies. See, e.g. Battuello v. Battuello (1998) 64 Cal. App. 4th 842.
Creditor's Timeline for Filing a Claim
The second important deadline is the filing of the creditor's claim. A creditor only has four (4) months from the date an executor or personal representative is officially appointed, to file a claim in probate. The general rule is that a creditor's claim is barred if it is not filed by the later of 4 months after the issuance of the "letters" appointing the personal representative or 60 days after the date that specific notice is given to that creditor. Creditors must file their claims with the Court and serve a copy on the personal representative. A creditor's claim may be rejected by the executor or personal administrator. If this occurs, the creditor has three months following the rejection before losing all rights to sue.
Frequently, the personal representative is unaware of your client's judgment and neglects to provide notice of the time to file a probate claim. Generally, the personal representative only has to give notice to reasonably ascertainable creditors. If the creditor was unaware of the judgment debtor's death, the creditor can petition the probate court for leave to file a creditor's claim per California Probate Code Section 9103. The relief available however, is somewhat circumscribed. A creditor with actual notice of the pendency of the estate cannot meet the requirements under 9103 even if they failed to receive formal notice. Further, a creditor seeking relief must not have known of the facts giving rise to the claim more than 30 days prior to the expiration of the time limits to file a claim under California Probate Code Section 9100. After that, the creditor's claim is gone (with the exception of a secured creditor's lien rights under an abstract of judgment). Thus, it is incumbent upon a creditor that does receive notice to file a timely creditor's claim.
The court will not allow a petition for a late claim when the delay is due to the creditor's mistake or negligence, which is why working with a collection attorney who has a regular process in place for monitoring the judgment debtor over time is important to preserve a judgment creditor's rights against an estate.
For assistance with filing collecting a debt against a deceased individual, contact experienced Los Angeles commercial collections attorney Ronald P. Slates today.