Detailed Answer
In Maryland probate, personal representatives (PRs) must notify known creditors, review claims, and either pay, reject, or negotiate each claim before distributing assets. Follow these steps to negotiate and settle a creditor claim:
- Identify and meet deadline for presenting claims. A creditor must present its claim within three months after the PR mails notice to known creditors, or within six months after the issuance of letters of administration for unknown creditors. See Est. & Trusts § 7-302.
- Review the claim’s validity. Examine invoices, contracts or medical statements to confirm the debt amount, due date and priority status. Unsecured claims rank after secured, funeral and administrative expenses.
- Assess estate liquidity. Inventory assets, estimate administration costs, and confirm that funds exist to satisfy priority claims before negotiating with lower-priority creditors.
- Open negotiations in writing. Send a settlement proposal outlining payment terms (e.g., lump sum, installment plan or reduced payoff). Keep all correspondence and counteroffers documented.
- Seek court approval if needed. If you reach a compromise on a disputed claim, file a petition with the Orphans’ Court. Maryland law permits a PR to settle claims with court approval. See Est. & Trusts § 7-501.
- Finalize and record the settlement. Once approved, execute a written settlement agreement. File the agreement and proposed distribution order with the court, then distribute funds in accordance with the court’s order.
Disclaimer: This article provides general information about Maryland probate procedures. It is not legal advice. For advice tailored to your situation, consult a licensed attorney.
Helpful Hints
- Track creditor deadline dates on a central calendar.
- Keep clear, written records of all communications and offers.
- Use mediation if negotiations stall or disputes arise.
- Review estate assets regularly to ensure adequate funds for high-priority claims.
- Confirm court approval before disbursing settlement funds.