What Is a Notice to Creditors?

The notice to creditors is a public notice usually posted in a local newspaper by a trust or estate's executor as part of the probate of the estate of a deceased person. The notice serves as the official notification to both creditors and debtors of the probate of a deceased individual’s estate and may run for a period of weeks depending on state laws.

The executor or executrix—in some states known as the personal representative—is charged with paying outstanding debts and collecting monies owed to the estate as part of her duties after being appointed by the court.

Key Takeaways

  • A notice to creditors is a public statement noting the death of an individual in order to alert potential creditors to the situation.
  • Still published in local newspapers, the notice is filed by the estate's executor and meant to facilitate the probate proceedings.
  • Creditors will have a limited amount of time to respond to the notice, which may also be filed by individuals declaring bankruptcy.

How a Notice to Creditors Works

In the United States, when a person dies, there is typically at least an informal probate process of the deceased's estate. The phrase “avoiding probate” refers to the strategy of arranging for the non-probate transfer of assets via trusts, joint accounts or other means such as life insurance. Some states have an asset threshold allowing small estates to avoid probate, but if an interested party objects, there are assets requiring probate, or other issues exist, a probate case will be opened.

Depending on state laws, once probate is opened, creditors usually have a limited amount of time from the date they were notified of the testator’s death to present any claims against the estate for money owed to them. Claims that are rejected by the executor can be filed in court where a probate judge will have the final say on whether or not the claim must be paid. Even though newspapers have given way to digital and online media, they are still the most commonly used medium with which to send a notice to creditors.

Notice in Bankruptcy Proceedings

A notice to creditors is also filed for bankruptcy proceedings. In the event of personal bankruptcy, the notice is filed before the first meeting of creditors, known as a 341 meeting. Individuals filing Chapter 7 or Chapter 13 bankruptcy must attend this meeting with the bankruptcy trustee and creditors may also attend and ask questions.