Creditors Claims and the Debts and Demands Procedure
Creditors Claims Against a Decedent’s Estate
Creditors of a decedent may file claims with the Commissioner’s office on an estate before the Commissioner for supervision and settlement. For creditors wishing to file such claims, the following procedure applies:
a. The claim must be filed in writing, with the claimant’s name, address, telephone number and email address;
b. The claim must contain a precise statement of (i) the amount of the claim; (ii) how it was determined; and (iii) state the basis for the claim (e.g. written contract, oral contract, note, open account etc.);
c. The claim must be supported by documentation consisting of a sworn affidavit, statement of the account, copy of the contract or other documents tending to establish the claim as one against the decedent’s estate; and
d. The claim fee of $95.00 due to the Commissioner of Accounts for a claim filed other than one associated with a Debts and Demands procedure must be tendered with the claim.
Failure to comply with this procedure could result in your claim not being properly noted on the estate record by the Commissioner.
Claims Associated with a Notice of a Debts & Demands Hearing
What is the Debts and Demands Procedure?
Debts and Demands is a statutory procedure which allows a personal representative of a decedent’s estate to request claimants against the estate to come forward and present claims which must be resolved in the settlement of the estate. NOTE: The debts and demands process is used only in the settlement of a decedent’s estate and does not apply to trusts, conservatorships, or guardianships.
It is also the opportunity for the fiduciary to contest claims made against the estate which the personal representative feels are not proper/legal obligations to be paid. For example, the validity of a credit card debt can be determined on objection by the executor or administrator at a hearing by the Commissioner as part of a debts and demands proceeding. Additionally, an obligation which the personal representative feels is barred by the statute of limitations can be determined. (The fiduciary should not pay any obligation from the estate which is barred by the statute of limitations [so old as to be legally unenforceable]).
The debts and demands procedure, coupled with a show cause against distribution order from the Court, is the proper way to legally insulate the personal representative from personal liability for unknown creditors’ claims first filed with the personal representative after full distribution of the estate.
It is strongly recommended that the Debts and Demands procedure be used, followed by a Show Cause Against Distribution filed with the Court, unless you are absolutely sure you are aware of all of the decedent’s debts, accrued and contingent.
How is the Debts and Demands Procedure Initiated?
The procedures for debts and demands is covered by Section 64.2-550, Code of Virginia (1950), as amended. The proceeding is initiated by a simple written request from the personal representative to the Commissioner of Accounts or request of a claimant (creditor) of the estate. A letter to the Commissioner requesting that the Commissioner conduct debts and demands against the estate is all that is needed in order for the Commissioner to initiate the debts and demands procedure.
Is an Accounting Required to be Filed with a Request for a Debts and Demands Hearing?
The Henrico Commissioner of Accounts does not require that an accounting be submitted with a request for debts and demands; however, an inventory must have been filed.
It may, however, be beneficial to file a short period accounting with the debts and demands request as the protection afforded the personal representative from personal liability for debts of the estate appearing after final distribution requires both a debts and demands hearing and then an order of distribution entered by the Circuit Court. That order of distribution cannot be entered by the Court unless debts and demands have been requested, a report made by the Commissioner of Accounts, and an accounting has been approved by the Commissioner’s office and has been confirmed after the filing of the account by the Commissioner with the Clerk of the Henrico Circuit Court.
****Do not submit a request for an Order of Distribution to the Clerk of Court without having requested debts and demands and without having an interim accounting approved by the Commissioner’s office and filed with the Clerk’s office, as the statute requires both steps prior to the Order of Distribution.
Is this Procedure for Debts and Demands Required on Every Estate?
No, this procedure is purely voluntary, but is suggested to protect the personal representative from personal liability to creditors of the estate.
What is Accomplished by the Debts and Demands Procedure?
The procedure is intended to give personal protection to the fiduciary against claims against the estate appearing after the fiduciary has made final distribution of all assets. If distribution is made by the fiduciary, the fiduciary may be personally liable for a debt presented after all assets have been distributed. If the fiduciary wishes statutory protection against personal liability, the debts and demands procedure followed by a petition to show cause against distribution and the order of distribution entered by the Circuit Court will provide protection against personal liability to the fiduciary for unknown debts of the estate arising after full distribution has been made.
The services of an attorney are almost always required to prepare and file the Petition for a Show Cause against Distribution and the Order of Distribution.
The services of an attorney are not required for the debts and demands procedure. A simple written request to the Commissioner of Accounts will initiate the action and the Commissioner will instruct you as to your obligations during that procedure.
Debts and demands is also the way to resolve claims against the estate which the fiduciary contests. Contested credit card debts, contract claims or any other claim made against the estate can be, and should be challenged if considered by the fiduciary not to be a valid claim against or debt of the estate. Claims barred by the statute of limitations should not be paid and a fiduciary is personally liable for the payment of such barred claims from the estate. Request a debts and demands hearing to have such invalid or barred claims heard and ruled on by the Commissioner.
What are the Personal Representative’s Obligations Under the Debts and Demands Proceeding?
- The personal representative requests the Commissioner, in writing, that debts and demands be taken against the estate;
- The Commissioner schedules a hearing date at the Commissioner’s office for creditors to appear and make their claims, in writing, against the estate;
- The Commissioner’s office advises the personal representative to notify the Commissioner and the creditor of any claim contested by the personal representative, and the personal representative is required to give written notice of the Debts and Demands hearing date to such creditor. Notice to that creditor MUST SPECIFICALLY ADVISE THE CREDITOR THAT THE CLAIM IS DISPUTED, if that is the case;
- The Commissioner’s office arranges for, and publishes a notice for the taking of debts and demands;
- If no creditors claims are contested, no one (personal representative or creditor) appears on the date set for the taking of debts and demands by the Commissioner. Any creditors whose claims are disputed by the estate, or are being filed against the estate for the first time, must submit their claims, fully documented, in writing, at or before the first hearing date;
- If any claims are disputed, the Commissioner will schedule a later hearing date on those claims, at which time evidence of the validity or non-validity of the claim must be presented, and the Commissioner thereafter makes a determination and reports to the Court on the validity of the disputed claims;
- The Commissioner files a report on debts and demands with the Henrico Circuit Court with a copy to the fiduciary;
- The creditor or personal representative may file “exceptions” to the report with the Clerk of the Circuit Court within 15 days of the filing of the report by the Commissioner.
What are the Costs of the Proceedings for Debts and Demands?
The Commissioner’s office is entitled to a fee of $350.00, plus an hourly charge on any contested claims requiring a hearing. A Clerk’s fee of $18.00 is payable as a cost of filing the report with the Court. Additionally, the cost of publication of the notice of taking of debts and demands in the Richmond Times Dispatch is charged to the estate. All of the above expenses are payable by the fiduciary from the estate of the decedent.