Creditor Claims in California Probate: Complete Guide for Executors

As executor of a California estate, one of your most important duties—and potential sources of personal liability—is properly handling creditor claims.

California probate law creates a structured process for creditors to file claims against the estate, with strict timelines, priority rules, and procedures executors must follow. Mishandling creditor claims can result in personal liability for the executor.

As a Glendale probate attorney who guides executors through this process, I've seen executors make costly mistakes: paying claims out of order, paying invalid claims, or failing to reject questionable claims.

This comprehensive guide explains how the creditor claims process works in California probate, the 4-month creditor claim period, priority of debts, how to review and accept or reject claims, what to do when claims exceed assets, and how executors protect themselves from liability.

Overview of Creditor Claims in Probate

California Probate Code Section 9000-9399 governs creditor claims.

Why Creditor Claims Matter

Debts don't die with the person.

Estate must pay:

• Credit card balances
• Medical bills
• Mortgages
• Personal loans
• Taxes
• Funeral expenses
• Final expenses

Before beneficiaries receive anything, legitimate debts must be paid.

Executor's Role

Executor must:

1. Notify known and potential creditors
2. Publish notice to creditors
3. Receive and review claims
4. Allow, reject, or compromise claims
5. Pay allowed claims in proper priority order
6. Protect estate from invalid claims

Executor's personal assets are NOT liable for estate debts—unless executor breaches fiduciary duty.

The 4-Month Creditor Claim Period

California Probate Code Section 9100

How the Creditor Claim Period Works

Creditors have 4 months from the date letters are issued to file claims.

Timeline:

1. Day 1: Letters testamentary/administration issued
2. Day 1-120: Executor publishes notice to creditors
3. Day 1-120: Executor sends notice to known creditors
4. Month 4 (Day 120): Creditor claim period ends
5. After Day 120: Late claims generally barred

Notice Requirements

Executor must provide two types of notice:

1. Published Notice (California Probate Code Section 9050)

• Publish once a week for 3 consecutive weeks
• In newspaper of general circulation where probate filed
• Must state: "Creditors having claims against decedent must file them within 4 months"

2. Direct Notice to Known Creditors (Section 9050)

• Mail notice to all reasonably ascertainable creditors
• Within 4 months of letters issued
• Creditor has 60 days from mailing OR 4 months from letters (whichever is later)

Extended Deadlines for Some Creditors

Known creditors who receive direct notice:

60 days from mailing OR 4 months from letters (whichever is later)

Example:

• Letters issued: January 1
• 4-month deadline: May 1
• Notice mailed to creditor: April 1
• Creditor has until June 1 (60 days from April 1) to file claim

Late Claims

After 4-month period expires:

• Most claims are barred
• Exception: Certain government claims may have longer periods
• Exception: Claims creditor didn't reasonably know about

California Probate Code Section 9103: Courts have limited discretion to allow late claims in exceptional circumstances.

Types of Creditors and Claims

Secured Creditors

Hold security interest in specific property:

Examples:

• Mortgage lender (secured by house)
• Auto loan lender (secured by car)
• Lien holders

Rights:

• Can foreclose on collateral if not paid
• Must still file claim in probate
• Priority to proceeds from their collateral

Unsecured Creditors

No security interest in property:

Examples:

• Credit card companies
• Medical providers
• Personal loans without collateral
• Utility companies
• Service providers

Must file timely claim to be paid.

Priority Creditors

Some debts have statutory priority over others:

1. Funeral and last illness expenses
2. Administration costs (attorney fees, executor fees, court costs)
3. Federal taxes
4. State taxes
5. Secured debts (to extent of collateral)
6. Judgments
7. All other debts

California Probate Code Sections 11420-11421

Government Claims

Special rules for government entities:

Federal government:

• Not bound by 4-month limitation
• Can file claim anytime during probate

State and local governments:

• Generally must file within 4 months
• Some exceptions for tax claims

How Creditors File Claims

Required Form

Creditor must use: Judicial Council Form DE-172 (Creditor's Claim)

Must include:

• Creditor's name and address
• Amount claimed
• Basis of claim (what debt is for)
• Whether claim is secured or unsecured
• Supporting documentation

Where to File

File with court clerk in county where probate is pending.

Serve copy on executor (or executor's attorney).

What Happens After Filing

Executor has 4 options:

1. Allow claim (approve it)
2. Reject claim (deny it)
3. Allow in part, reject in part
4. Take no action (deemed allowed after 90 days)

How Executors Review Claims

Step 1: Verify Claim Is Timely

Check filing date against deadline.

If late: Claim can be rejected on that basis alone.

Step 2: Verify Claim Is Properly Documented

Proper claim must include:

• Completed Form DE-172
• Proof of mailing to executor
• Supporting documentation (invoices, statements, contracts)

If deficient: Notify creditor of defects; creditor can cure within claim period.

Step 3: Investigate Validity of Claim

Executor should:

• Review decedent's records
• Verify debt was actually incurred
• Confirm amount is accurate
• Check if debt was already paid
• Determine if debt is enforceable

Common invalid claims:

• Claims for amounts already paid
• Claims not actually owed by decedent
• Claims barred by statute of limitations
• Fraudulent claims

Step 4: Determine If Claim Is Secured or Unsecured

Affects priority of payment.

Secured claims:

• Check if security interest is valid
• Verify lien was properly recorded
• Determine value of collateral

Step 5: Calculate Amount Owed

For claims with interest:

• Confirm interest rate is valid
• Calculate interest through date of payment
• Determine if pre-petition interest applies

Step 6: Make Decision

Executor must decide:

• Allow claim in full
• Allow claim in part
• Reject claim
• Negotiate compromise

Allowing Claims

California Probate Code Section 9250

When to Allow Claims

Allow claim if:

• Timely filed
• Properly documented
• Valid debt actually owed
• Amount is accurate
• Debt is enforceable

How to Allow Claims

File with court: Allowance of Creditor's Claim (Form DE-174)

Effect: Claim becomes allowed claim against estate, must be paid according to priority rules.

Executor discretion: Can allow without court approval for most claims.

Rejecting Claims

California Probate Code Section 9250

When to Reject Claims

Reject claim if:

• Filed late
• Not properly documented
• Invalid debt
• Amount incorrect
• Debt not enforceable
• Claim fraudulent
• Statute of limitations expired

How to Reject Claims

File with court: Rejection of Creditor's Claim (Form DE-174)

Serve creditor with copy of rejection.

Effect:

• Creditor cannot be paid from estate
• Creditor can sue estate to establish claim (must file lawsuit within 90 days of rejection)

Creditor's Options After Rejection

If claim rejected, creditor must:

File lawsuit within 90 days of rejection notice OR claim is barred forever.

Lawsuit is against:

• The estate (not executor personally)
• Determines if claim is valid

If creditor doesn't sue within 90 days: Claim is barred permanently.

What If You're Not Sure About a Claim?

Option 1: Compromise

California Probate Code Section 9600

Executor can negotiate settlement:

• Propose partial payment
• Creditor agrees to accept less
• File Compromise of Creditor's Claim with court
• Requires court approval

When useful:

• Claim amount is disputed
• Validity is questionable
• Cost of litigation would be high
• Compromise serves estate interests

Option 2: Seek Court Instructions

California Probate Code Section 9391

Petition for court to:

• Determine validity of claim
• Determine amount owed
• Give executor direction

Protects executor by getting court ruling before paying or rejecting.

Option 3: Allow Subject to Later Challenge

Can allow claim provisionally while investigating further.

But: Once allowed, harder to undo.

Priority of Payment

California Probate Code Section 11420

When estate has insufficient funds to pay all claims, California law sets payment priority:

Priority Order

1. Funeral, last illness, and probate administration expenses

• Funeral costs
• Final medical bills
• Probate attorney fees
• Executor fees
• Court costs

2. Federal taxes

3. Expenses of family allowance (if granted)

4. Secured debts (to extent of collateral value)

5. State and local taxes

6. Judgments against decedent

7. All other debts (credit cards, personal loans, medical bills, etc.)

Within each class: Claims paid proportionally if insufficient funds.

Example: $20,000 available for Class 7 debts.

• Credit card #1 claim: $30,000
• Credit card #2 claim: $20,000
• Total claims: $50,000

Each gets 40% of their claim:

• Credit card #1: $12,000
• Credit card #2: $8,000

Insolvent Estates

Insolvent estate: Debts exceed assets.

What Happens

Not all creditors will be paid in full.

Executor must:

1. Pay claims in statutory priority order
2. Within each priority class, pay proportionally
3. Lower priority claims may receive nothing

Beneficiaries: Receive nothing (debts must be paid first).

Notice of Insolvency

If estate appears insolvent:

Executor should:

• Inform creditors
• Consider petition for early distribution to certain creditors
• Get court approval for payment plan
• Ensure proper priority order

Executor Protection

Not executor's fault estate is insolvent.

Executor protected if:

• Followed proper procedures
• Paid in correct priority order
• Didn't prefer one creditor over equal-priority creditor

Special Types of Claims

Tax Claims

Federal estate taxes:

• Due 9 months after death
• Extensions available
• Penalty and interest if late

Income taxes:

• Final return due
• Estate income tax returns
• Must file all required returns

Property taxes:

• Continue to accrue
• Must be paid to avoid liens

Medical Bills

Final illness expenses:

• High priority (Class 1)
• Medi-Cal recovery claims (special rules)

Credit Card Debt

Unsecured, Class 7 priority

Not personally liable unless:

• You were joint account holder (not authorized user)
• You signed for debt

Mortgage Debt

Secured by property

Options:

• Keep making payments (if estate can afford)
• Sell property and pay off mortgage
• Let beneficiary assume mortgage
• Let lender foreclose (if underwater)

Business Debts

If decedent had business:

• Separate claims for business debts
• May need to wind down business
• Notify business creditors

Executor Liability for Creditor Claims

When Executor Is Personally Liable

Executor can be personally liable if:

1. Pays claims out of priority order

   • Lower priority creditor paid before higher priority
   • Higher priority creditor can sue executor personally

2. Pays invalid claim

   • Should have rejected claim
   • Estate harmed by improper payment

3. Fails to notify known creditors

   • Creditor's claim is barred
   • Creditor can sue executor personally

4. Distributes assets before paying claims

   • Creditors can pursue executor personally
   • Or pursue beneficiaries who received distributions

5. Fails to properly investigate claims

   • Allows fraudulent claims
   • Fails to reject invalid claims

How Executors Protect Themselves

Best practices:

1. Keep detailed records of all claim reviews
2. Get attorney advice on questionable claims
3. File inventory promptly to start claim period
4. Send notices to all known creditors
5. Don't distribute estate until claim period expires and claims are paid
6. Follow priority order strictly
7. Reject questionable claims (let creditor sue if they want)
8. Get court approval for compromises
9. Consider probate bond (protects against errors)

Frequently Asked Questions

What if I don't know about a debt until after the 4-month period?

Late claims can sometimes be filed, but generally claims are barred after the deadline. This protects estates from indefinite liability.

Can beneficiaries be liable for debts?

Generally no, unless they received property that should have been used to pay creditors. Even then, liability is limited to what they received.

What if estate can't pay all debts?

Estate is insolvent. Pay in priority order, proportionally within each class. Lower priority creditors may receive nothing.

Do I have to pay debts that are past the statute of limitations?

No. These debts are unenforceable. Reject any claim for time-barred debt.

What about joint debts?

If decedent was jointly liable, creditor can pursue co-debtor. Co-debtor may have claim against estate for contribution.

Should I pay funeral expenses before filing probate?

Yes, funeral expenses have highest priority and should be paid promptly. Keep receipts for reimbursement.

What if creditor threatens me personally?

Refer them to estate's attorney. You're generally not personally liable for estate debts.

Can I negotiate debt settlements?

Yes, with court approval. Compromises must serve estate's best interests.

Related Articles

Essential guides for California executors:

• California Executor Duties & Responsibilities - Complete checklist including creditor notification duties.

• How Long Does Probate Take in California? - 4-month creditor period is part of the timeline.

• How Much Does Probate Cost in California? - Administration costs have first priority in payment.

• Executor Fees California - Executor compensation paid from estate after creditor claims.

• Letters Testamentary California - Authority needed to handle creditor claims.

Get Professional Help with Creditor Claims

Handling creditor claims properly is critical to avoid personal liability as executor. One mistake in priority order or paying an invalid claim can result in personal financial responsibility.

Call (818) 291-6217 to schedule a consultation at my Glendale office, or complete our probate questionnaire to discuss your probate administration.

As a California probate attorney serving Los Angeles County, I guide executors through the entire creditor claims process, review questionable claims, handle rejections and compromises, ensure proper priority order, and protect executors from personal liability.

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About the Author

Rozsa Gyene (State Bar No. 208356) is a California estate planning and probate attorney serving Glendale, Burbank, Pasadena, and throughout Los Angeles County. With extensive experience advising executors on creditor claims and protecting them from personal liability, Rozsa provides practical guidance on navigating California's complex creditor claims procedures.

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Disclaimer: This article provides general information about California probate creditor claims and should not be construed as legal advice. Every situation is unique. Creditor claims procedures and deadlines change, and this article reflects California law as of January 2025. Consult with a qualified California probate attorney about your specific circumstances.