How Do You Handle Debts and Claims Against an Estate?

Losing a loved one is one of life’s most painful experiences. The grief alone can feel like too much to carry. Yet, in the days and weeks that follow, families are often thrust into a world of legal and financial responsibilities that demand immediate attention. Assets must be inventoried, beneficiaries must be identified, and, perhaps most unexpectedly, creditors must be addressed.

This process, known as probate, requires the estate to settle all outstanding debts before a single dollar reaches the people your loved one intended to provide for. Disputes can arise. Bills can be contested. And the emotional weight of the process can make every decision feel more difficult than it needs to be.

That is where the Van Den Heuvel Law Office comes in. With decades of experience guiding Michigan families through the probate process, our legal team helps personal representatives open their case correctly, so families can focus on what matters most.

Here is what you need to know:

• Debts do not disappear at death. Outstanding obligations become the responsibility of the estate.
• The personal representative (PR) carries specific legal duties when it comes to notifying and responding to creditors.
• Creditors have a limited window to file claims, typically four months from the date of the published notice.
• Not all debts are equal. Michigan law establishes a strict priority order for paying claims.
• Disputed bills can be formally rejected, and creditors must take legal action within 63 days to pursue them.

What Happens to Debt When Someone Dies?

Under Michigan law, a person’s debts do not vanish upon death. Instead, those debts transfer to the estate. The estate, comprised of all assets the deceased owned at the time of death (real estate, bank accounts, personal property, and investments), becomes responsible for resolving any outstanding obligations.

A personal representative, sometimes called an executor, is appointed to manage this process. The personal representative reviews claims, pays valid debts, and distributes what remains to the beneficiaries. Importantly, individual family members are generally not personally responsible for these debts unless they co-signed a loan or held a joint account with the deceased.

Only after all valid claims, taxes, and administrative costs are settled can the remaining assets pass to heirs.

What Is the Priority of Claims Against an Estate?

When an estate does not have enough assets to cover all its debts, Michigan law determines which creditors get paid first. Personal representatives must follow this order precisely or risk personal liability. According to MCL 700.3805, the priority of payments is as follows:

• Costs and expenses of administration: Court costs, personal representative fees, and attorney fees come first.
• Reasonable funeral and burial expenses: These are paid second.
• Statutory allowances: Homestead allowance, family allowance, and exempt property allowances follow.
• Federal and state taxes: Tax debts, including medical assistance payments, fall into this category.
• Medical and hospital expenses: Reasonable and necessary expenses from the decedent’s last illness are next.
• All other claims: General unsecured debts, such as credit card balances and personal loans, are addressed last.

If the estate’s assets are exhausted before reaching lower-priority creditors, those creditors may receive nothing. No preference is given to claims within the same class.

How Do You Handle Disputed Bills?

Not every bill submitted against an estate is legitimate. The personal representative has both the authority and the responsibility to review each claim carefully.

If the personal representative does not intend to pay a submitted bill, they must send the creditor a formal “notice of disallowance of claim.” This notice informs the creditor that their claim is rejected and that they are barred from collecting unless they file a civil lawsuit against the estate. That lawsuit must be filed no later than 63 days after the notice’s mailing date.

If the creditor does nothing within that window, they forfeit their right to pursue the claim. This outcome is common.

What Are the Creditor Deadline Rules for an Estate?

Timing matters significantly in estate administration. The personal representative must publish a notice to creditors in a local newspaper in the county where the deceased lived. Once published, creditors have four months to come forward with their claims.

There are two categories of creditors:

• Known creditors: Those whose existence is reasonably identifiable through the deceased’s records from the previous two years. Known creditors receive direct personal notice of the death.
• Unknown creditors: Those who cannot be located through reasonable investigation. The published newspaper notice serves as their notification.

If the personal representative fails to publish the notice, creditors retain the right to bring claims for up to three years from the date of death. Publishing the notice is therefore strongly advisable; it limits that window to four months and allows the estate to be closed with greater confidence.

What Are the Personal Representative’s Duties When Managing Estate Claims?

The personal representative carries substantial legal obligations. Missteps, whether paying a claim out of order or settling an invalid debt, can result in personal liability. Key duties include:

• Reviewing each claim for validity and accuracy before taking any action.
• Notifying creditors of disallowance when a claim is rejected, using the proper legal form.
• Paying valid debts in the correct order of priority under Michigan law.
• Distributing remaining assets to beneficiaries only after all legitimate claims are resolved.

The personal representative should seek experienced legal counsel before paying any claims, particularly when the estate’s solvency is uncertain. Paying a lower-priority creditor before a higher-priority one can expose the personal representative to personal financial liability.

Let the Van Den Heuvel Law Office Help You Handle Estate Claims

Handling debts and claims against an estate requires careful attention to legal deadlines, proper notice procedures, and Michigan’s priority of payment rules. A misstep at any stage can have real financial consequences.

At the Van Den Heuvel Law Office, our legal team works alongside personal representatives throughout the entire probate process. We help families address creditor claims appropriately, protect beneficiaries’ interests, and bring the estate to a proper close. Contact us to schedule a consultation and get the guidance your family needs.