A creditor is an individual, organization, or entity to whom a deceased person owed money, or Credits, at the time of their death.
Creditors can be individuals, banks, credit card companies, or other types of financial institutions that have extended credit or loaned money to the deceased, known as a Debtor.
During the Estate Administration process it's important to catalog creditors in order to pay all of the deceased's final debt.
During this process, an Executor or Administrator must send a Notice to Creditors to inform them of the death and that probate has begun. Creditors are then given a specific period to file claims against the estate, and their claims are reviewed for validity.
Once the creditor's claim is validated by Probate Court, the estate's assets are used to pay the creditor before any of the deceased's Assets can be Distributed to Surviving Family members, Heirs or other Beneficiaries.
Creditors are paid in a specific order based upon state law, typically prioritizing Funeral expenses, followed by administrative expenses related to estate management, outstanding taxes, Secured Debts backed by collateral, Unsecured Debts like credit card balances and medical bills, and then any court-ordered payments,
Common examples of creditors of a deceased person include:
Mortgage Lenders: If the deceased person had a mortgage on their home or other real estate, the mortgage lender is considered a creditor because there is an outstanding debt associated with the property. This type of credit is known as Secured Debt.
Credit Card Companies: Credit card issuers are creditors when there are unpaid credit card balances or outstanding credit card debt at the time of the person's death. This type of debt is known as Unsecured Debts.
Medical Providers: Hospitals, doctors, and other healthcare providers can be creditors if there are unpaid medical bills related to the deceased person's medical treatment.
Utility Companies: Unpaid utility bills, such as electricity, water, gas, and phone services, can result in utility companies being creditors.
Tax Authorities: Unpaid taxes, including income taxes, property taxes, and other tax obligations, may make tax authorities such as the Internal Revenue Service (IRS) or state tax agencies creditors.
Lenders and Creditors: Personal loans, auto loans, student loans, and other forms of borrowing from financial institutions or individuals can create creditor claims.
Landlords: If the deceased person was renting a property and had unpaid rent or lease payments, the landlord becomes a creditor.
Judgment Creditors: Individuals or entities who obtained legal judgments against the deceased person through a court process, resulting in court-ordered payments, are considered creditors.