Notice to Creditors: Definition, Purpose, and How To Publish

What Is a Notice to Creditors?

A notice to creditors can be a specific contact with a known creditor or a public notice commonly posted in a local newspaper by a trust or estate's executor as part of the probate of the estate of a decedent.

The notice serves as the official notification to creditors and debtors of the probate of a deceased individual’s estate and the announcement may run for weeks depending on state laws. Known creditors must be given specific notice. The published notice captures all other unknown creditors.

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.

How a Notice to Creditors Works

In the United States, when a person dies, there may be 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 by other means, such as life insurance.

Some states have an asset threshold allowing small estates to avoid probate, but if an interested party objects, assets exist that require probate, or other issues are evident, a probate case will be opened.

Depending on state laws, once probate is opened, creditors 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 the 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 provide notice to outstanding 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.