What is my recourse if debtor dies and I am owed money?

My father-in-law passed away, leaving a son and daughter. What needs to be done to take care of her home and mortgage? The father’s brother seems to be acting as executor, while I am paying mortgage payments, utilities, taxes. Typically, whenever someone dies an estate must be commenced in the probate court. Probate laws provide for the payment of creditors and the distribution of assets to heirs and beneficiaries. In Michigan, these laws are codified in the Estates and Protected Individuals Code, MCL 700.1101 – MCL 700.8102. These laws are liberally construed and applied to discover and make effective a decedent’s intent in distribution of their property and to promote a speedy and efficient system for liquidating a decedent’s estate and making distribution to their successors.

In the hypothetical above, the son-in-law has become a creditor or claimant of the decedent. Since he wants to get reimbursed for his payment, he must file a claim with the probate court. The form can be found at http://courts.michigan.gov/scao/courtforms/probate/pc579.pdf. Once the claim has been filed, under MCR 5.125(B)(1), the personal representative is required to provide the claimant notice of specified proceedings, which in the case of the creditor will be proceedings related to the distribution of estate assets.

If no estate has been opened in the probate court, the creditor, according to MCL 700.3205 may file a demand for notice of order or filing concerning decedent’s estate. Under the law, a person who wants notice of any order or filing pertaining to a decedent’s estate in which the person has a financial or property interest may file a demand for notice with the court at any time after the decedent’s death stating the decedent’s name, the nature of the person’s interest in the estate, and the address of the person or the person’s attorney. If a proceeding is not pending at the time a demand is filed under this section, the person filing the demand must pay the fee required to commence a proceeding. The person filing a demand shall mail a copy of the demand to the decedent’s attorney, if known, to the personal representative if one has been appointed, and to the personal representative’s attorney. After filing the demand, the person is an interested person entitled to notice as provided in section 1401 and the other provisions of this act.

There are situations in which no notice needs to be given to creditors. Pursuant to MCR 5.306(C), no notice is required if the estate has no assets; the estate is a small estate to be summarily distributed; the decedent has been dead for more than 3 years; notice has previously been given; and if the claim has already been presented and paid.

Creditors have the right to take other action as well. A creditor may make a written demand that the personal representative file a bond if the amount of the claim is in excess of $2,500 according to MCL 700.3605. They may also commence a formal proceeding to determine testacy or commence a formal proceeding to determine the priority or qualification of the personal representative according to MCL 700.3401. They may file a petition for supervised administration under MCL 700.3502. They may additionally file a petition for a temporary restraining order to restrain the personal representative from performing some act pursuant to MCL 700.3607; and pursuant to MCL 700.3911 commence a proceeding against a distributee to recover property improperly distributed.

Once the personal representative receives a claim, she may allow or disallow the claim in whole or in part by sending a notice to the claimant. The notice of disallowance must include a warning that the portion of the claim that was disallowed will be barred unless the claimant starts a civil action by filing a complaint against the personal representative within 63 days. The claimant’s recourse is then to start a civil action by filing a complaint against the personal representative. Such a complaint must be filed within 63 days after the mailing of the notice or the claim will be barred.

The personal representative must allow or disallow the claim within 63 days after presentation of the claim or within 63 days of the appointment of the personal representative, whichever is later. However, there is an exception for the presentation of claims for fees and expenses of the personal representative, attorney and other specialized agents. According to MCL 700.3803(3)(c), there is no time limit. The action proceeds the same as any civil lawsuit and is heard in the probate court. All interested persons must be given notice of the contested matter so that they have the opportunity to intervene in the matter.

The charges against an estate must be paid in according to their priority: (1) Expenses of administration; (2) funeral and burial expense; (3) homestead allowance; (4) family allowance; (5) exempt property allowance; (6) debts and taxes with priority under federal law; (7) reasonable and necessary medical and hospital expenses of the decedent’s last illness, including a compensation of persons attending the decedent; (8) debts and taxes with priority under laws of Michigan; (9) all other claims.

In the situation above, in addition to taking action as outlined above, the son-in-law can attempt to find out how the home is titled. If the home was held in the name of both the decedent and another party, joint with rights of survivorship, then the joint owner is the new home owner. Being the new home owner, they would be responsible for taking care of the decedent’s home and mortgage. If the son-in-law were to abstain from making the payments in this above hypothetical, this would likely force the issue.

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