Allowing a Creditor’s Claim
What Does It Mean to “Allow” a Creditor’s Claim?
To “allow” a Creditor’s Claim means that you have determined that the claimant’s claim:
- Was legally incurred by Decedent during his/her life (eg, the obligation is the proper subject of a Creditor’s Claim and is not, for example, a “Cost of Administration“),
- Remains unpaid, and
- Has been legally presented (ie, it meets all the requirements for presentation shown in Determining Whether Creditor’s Claims Are Lawfully Presented).
What to “allow” a Creditor’s Claim does not mean:
- That the obligation is necessarily now due and owing. It could be a valid debt due sometime in the future, such as a Promissory Note that has not matured).
- That the estate necessarily has the ability to pay the Claim. “Allowance” of a Creditor’s Claim focuses on the validity of the Claim, not the ability of the estate to pay it (that is addressed by the “ranking” of Claims and other expenses under RCW 11.76.110 — See Estate Insolvency).
- That the Claim will ever be paid. If the estate has no cash or other assets, no Claim will ever be paid, even if properly presented, allowable, and allowed.
- That if the Claim is eventually paid, when it will be paid.
Following allowance, you must:
- “… notify the claimant of the allowance ….” RCW 11.42.090(1) And if the estate is insolvent, meaning that it has insufficient cash and other assets to pay all of its obligations:
- Pay each Claim according to the priority order provided in RCW 11.42.090(2), which, in effect, determines which of the creditors whose Claims have been allowed will be paid if there insufficient assets to pay all the creditors for their allowed Claims. This issue is moot if there is no issue of insolvency.
Now, let’s move from “what does ‘allowing’ mean” to “how do you allow.”
If you have determined to allow such a Claim:
- Complete the Creditor’s Claim that you received from the claimant.
- Mail a copy of your completed Creditor’s Claim to the claimant at the address shown on the Creditor’s Claim.
- File the original of your completed Creditor’s Claim with the Court.
If you are not allowing the full amount of the Creditor’s Claim, go to Rejecting a Creditor’s Claim and follow Steps 2 through 4 of those instructions.
Timetable: Do all the above by the later to occur of:
- 4 months from the date of first publication of your Nonprobate Notice to Creditors, or
- 30 days from the date of your receipt of the Creditor’s Claim.
By “holding” a Claim, you are effectively putting the issue back in the claimant’s lap — The claimant is forced to put further energy into pursuing it. Specifically, the claimant can notify you in writing that he or she will petition the Court to have the Claim allowed. If you then continue neither to allow nor reject the claim nor notify the claimant of your allowance or rejection within 20 days of your receipt of the claimant’s notice, the claimant can petition the Court for a hearing to determine whether the Claim should be allowed or rejected (in whole or part). RCW 11.42.080(2)
Caution: If the Court substantially allows the Claim, you (meaning the nonprobate estate and its beneficiaries) not only will become liable for the amount allowed by the Court but also may become liable for the claimant’s reasonable attorney’s fees to obtain the Court’s allowance. RCW 11.42.080(2) Furthermore, if you had no reasonable basis for not allowing the Claim (eg, you had a personal grudge against the claimant and refused to allow the Claim out of spite), the nonprobate estate’s Beneficiaries may be able to obtain a Court Order shifting the claimant’s reasonable attorney’s fees from the nonprobate estate to you personally.