Are You a Creditor Losing Money in Probate Matters?

March 28, 2008

Creditors aren’t just banks and credit unions anymore. Retailers, hospitals, homebuilders - virtually any provider of consumer goods and services - are all joining credit-card companies and other traditional lenders in extending an ever-increasing volume of credit. At the same time, Americans are living longer lives than ever before.

On their own, each of these statistics seems fairly straightforward. Taken together, however, they may have a significant impact on the financial value of creditors’ claims against estates and guardianships - and the ability of creditors to recover these assets.

As individual life expectancies continue to increase, so, too, are the rates of dementia, Alzheimer’s disease and other mental-capacity issues. In response, more and more guardianships are being created to help families deal with the medical and financial-management issues that arise in these difficult situations.

Likewise, the rate of personal debt is also growing. Americans are carrying a higher level of debt for longer periods of time. The net, combined result of these factors is that more and more individuals are dying or entering guardianships with outstanding financial obligations. 

This changing state of affairs can have a significant negative impact on creditors, including lenders, credit-card companies, healthcare providers and other businesses that extend credit to individuals. For example, the Texas Probate Code includes numerous statutory provisions that permit an executor or a guardian of an estate to bar the claims of creditors who fail to timely and properly file a verified claim. Businesses may be losing hundreds of thousands of dollars in claims that have been disallowed due to a lack of familiarity with the probate process and applicable statutes.