How Does a Creditor Collect a Debt Against a Deceased Debtor in Ohio?

Generally, a creditor’s claim against a deceased debtor is not extinguished upon death but the procedure in attempting to collect the debt through the courts is different from a traditional collection matter. Prior to the death of a debtor, a creditor can file a lawsuit if warranted and personally name the debtor in order to obtain a judgment and subsequently file a judgment lien. However, when a debtor passes away, a creditor cannot simply file a lawsuit against the deceased debtor to obtain a judgment. In order for a creditor to protect its rights to collect a debt from a decedent, a claim must be presented into the decedent’s estate according to the particular state probate laws that govern presentment of a claim. In some cases, the creditor must apply to administer an estate in order to present its own claim.

Each state has adopted its own probate laws and each county court within a state has unique rules that outline the requirements for presenting a claim into an estate. The individual state and local court requirements in presenting a claim will vary on the time allowed to file a claim, the procedure or form used to file the claim, and the actions a creditor may take when a claim is rejected or disallowed by the estate’s representative. Thus, a creditor needs to be aware of the particular state laws and local court rules, which has jurisdiction over the deceased debtor’s estate, to ensure they are not barred from collecting a debt simply for failing to comply with the procedural requirements.

A creditor needs to be particularly aware of the imposed statute of limitations to file a claim under each state’s presentment statutes. In Ohio, for example, a claim of a general creditor against an estate must be presented within six (6) months from a decedent’s date of death whether or not the assets of an estate are released from administration or if an executor or administrator is appointed during the six-month period. O.R.C. 2117.06 (B). This means that the time for a creditor to present a claim in Ohio starts to run from the date of death, not from when an estate is
actually opened, and that the time period expires after six months has passed.

In theory, the imposed time periods are to simplify the estate process and to facilitate a speedy administration, which should include satisfying a decedent’s debts and liabilities. Yet, the recent trend in Ohio is for a decedent’s family members to use the statute to their benefit by waiting to open an estate until after the six-month time frame has lapsed in order to time-bar all creditors’ claims that would be presented once the estate is actually opened. The question then becomes how can a creditor protect its rights in collecting against a deceased debtor if no estate is opened within the allowed time frame?

One option is to send a demand letter and/or invoice statement in the name of the decedent to his or her last known address, and to anyone appointed as the individual’s caregiver, guardian, or power of attorney, if known.* The reason for sending a demand letter is an exception exists under the presentment statute that will deem a creditor’s claim timely filed if the person who is eventually appointed the executor or administrator is actually in receipt of a written notice of the claim within the sixth months from date of death. O.R.C. 2117.06 (A)(c). The challenge for a creditor is proving that the appointed representative was in receipt of the written notice within the required time period. This becomes a factual issue and the estate’s representative typically will reject the claim on this basis, which in turn will require the creditor to file a lawsuit against the estate to litigate the issue. Upon receiving a rejection of the claim, a creditor faces another imposed statute of limitations in Ohio, which requires a lawsuit on a rejected claim to be filed against the estate within two (2) months from the date the rejection is received. O.R.C. 2117.12.

A second option for a creditor if no estate is timely opened is to apply to administer the estate, as a creditor, within the six-month time period. Primarily, the Probate Courts in Ohio will accept an Application for Authority to Administer along with a creditor’s claim being filed simultaneously in order for the claim to be timely filed. The objective in forcing open the estate is to put the known heirs and/or family members on notice that an estate application has been filed to liquidate the decedent’s assets to pay his or her debts. Ideally, the intent is for the heirs to respond by taking over the estate administration but the creditor is still protected because the claim was timely filed. However, the risk is that no one takes over the estate and the creditor’s representative is appointed as the administrator over the estate.

In summary, a creditor can collect a debt against a deceased debtor in Ohio by filing a claim into the debtor’s estate but the manner in which a creditor protects its interest is governed by the individual state laws on presentment of a claim and the local court rules. In certain circumstances, an estate is not timely opened and in order to protect its rights, a creditor must decide to apply to be appointed the administrator to file its own claim within the required filing deadline. The creditor should be aware that its representative could be appointed as administrator over the estate if no one comes forward on behalf of the decedent. Before proceeding down the path of applying to administer an estate, a creditor should evaluate if it is cost-effective to administer an estate given the amount of assets, if any, that are available to satisfy the outstanding debt.

* Ohio Courts have held that “no strict form requirements are imposed for the presentment of claims to an executor.” H & R Accounts, Inc. v. Steel, 2006-Ohio-2331, citing Children’s Med. Ctr. v. Ward (1993), 87 Ohio App.3d 504, 622 N.E.2d 692. Claim can be letter or document (writing) and must contain the name of the decedent, creditor’s name and address, nature of the debt, and the amount owed to constitute “sufficient compliance” with the Ohio Revised Code. H & R Accounts, Inc. at ¶ 27.