Claims Against the Estate
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Transcript of Claims Against the Estate
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Claims Against the Estate
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PR gives notice to creditors [already covered]
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Presentment by Creditor -- GenerallyCreditor 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
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Claims Against the Estate
[continued]
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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
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Time of Presentment
General Rule – Any time before: Estate closed, or Statute of limitations runs▪ PC § 298▪ EC §§ 355.001
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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)
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Secured Claims
Types of Claims Mortgage Deed of trust Article 9 secured interest
Creditor has choice of how to proceed.
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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.
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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.
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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?
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Secured Claims
Time for Creditor Election Later of:▪ Four months after receipt of notice, 0r▪ Six months after letters issued.
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Action of PR on presented claimsTiming
Must act within 30 days.▪ PC § 309▪ EC § 355.051
Three options
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Action of PR on presented claims1. Accept
PR agrees that the claim is valid. Does NOT mean claim will get paid
(might not be enough property in the estate).
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Action of PR on presented claims2. 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
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Action of PR on presented claims3. 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?
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Claims Against the Estate
[continued]
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WARNINGS for Independent AdministrationThe following rules do NOT
apply:1. No requirement with respect to
form in which creditor must present claim (affidavit not needed).
2. No requirement that claim be presented before suit.
3. 90 day period for suing on rejected claim does not apply.
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Lusk v. Mintz – p. 152
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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
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Order of Payment of ClaimsAuthority
PC §§ 320 & 322 EC Chapter 355, Subchapter C Other provisions may also impact
the claim order.
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Order of Payment of Claims1. 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?
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Order of Payment of Claims2. 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.
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Order of Payment of Claims3. Homestead (or allowance in
lieu)
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Order of Payment of Claims4. Funeral expenses and
expenses of last illness up to a combined total of $15,000
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Order of Payment of Claims5. Exempt personal property (or
allowancein lieu)
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Order of Payment of Claims6. Family Allowance
x
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Order of Payment of Claims7. Administration and related
expenses
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Order of Payment of Claims8. 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).
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Order of Payment of Claims9. Delinquent and future child
support
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Order of Payment of Claims10. Certain Texas tax claims
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Order of Payment of Claims 11. Confinement claims
But not if convict had:▪ Surviving spouse,▪ Dependent minor child, or▪ Disabled child.
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Order of Payment of Claims12. Medicaid Recovery
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Order of Payment of Claims13. Unsecured claims
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Order of Payment of Claims14. Beneficiaries and Heirs
▪ Following the abatement order
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Order of Payment of ClaimsHope v. Baumgartner (p. 157)
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Claims after estate distributedCreditor 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