Detailed answer — step‑by‑step process

1. Understand the legal framework

Claims against a decedent’s estate in Colorado are governed by the Colorado probate statutes and court rules. The personal representative must follow the notice and claims procedure in the probate case. For the statutory framework and exact procedural requirements, see Colorado Revised Statutes, Title 15 (Probate, Guardianship, and Fiduciary Administration): https://leg.colorado.gov/colorado-revised-statutes/title-15-probate-guardianship-and-fiduciary-administration. For practical court forms and probate guidance, see the Colorado Judicial Branch probate unit: https://www.courts.state.co.us/Administration/Unit.cfm?Unit=probate.

2. Identify, notify, and collect claims

The personal representative must publish or mail notice to creditors as required by the court. Known creditors must be given direct notice. Creditors then present written claims. The representative should:

• Collect each claim in writing and any supporting invoices, contracts, or statements;
• Confirm the identity of the creditor and whether the debt is secured by estate property;
• Check statutory or court deadlines for when claims must be presented and when claims may be barred.

3. Verify and prioritize claims

Before negotiating, evaluate whether each claim is valid, timely, and enforceable. Important tasks include:

• Confirm that the amount requested matches invoices, account statements, or contractual terms;
• Determine whether a claim is secured (mortgage, security interest) or unsecured—secured claims often have priority to specific assets;
• Identify priority claims (administration expenses, taxes, funeral expenses, preferred medical support claims) and sequence payments according to Colorado law and any court orders.

4. Prepare for negotiation

Negotiation is nearly always easier and more successful when the representative prepares documentation and a realistic proposal. Helpful preparation steps:

• Assemble account records, the decedent’s contract or loan documents, and proof of payment history;
• Estimate available cash and liquidatable estate assets, and prepare a proposed settlement amount or payment schedule;
• Decide the estate’s negotiation priorities—preserve cash, settle cheaply, or protect assets to be distributed to beneficiaries.

5. Negotiate the payoff

Common negotiation tactics and options include:

• Offer a lump‑sum reduced payoff. Creditors often accept a smaller immediate payment rather than risking a contested claim in probate;
• Offer a short payment plan from estate funds if assets are sufficient and cash flow is predictable;
• Request proof and detail for disputed charges, then negotiate down based on discrepancies or lack of documentation;
• For secured claims, negotiate on arrears or deficiency amounts rather than principal secured by asset value;
• Put any settlement offer in writing and require a signed release that states the creditor accepts the agreed amount as full satisfaction of the claim.

6. Document every settlement and payment

Recordkeeping protects the personal representative from future claims or beneficiary disputes. For each settled claim, retain:

• The original claim and creditor communications;
• A written settlement agreement or release signed by the creditor;
• Proof of payment (cancelled checks, bank records, or receipts);
• An entry in the estate accounting showing the claim, settlement amount, payment date, and method.

7. When court approval or allowance is required

Some situations require the probate court’s involvement:

• If a creditor objects to the representative’s rejection or reduction of a claim, the matter may go to court for allowance or disallowance;
• If the settlement involves a disputed or substantial claim, the representative may seek court approval before paying to avoid later personal liability;
• If the estate lacks sufficient assets to pay claims in full, the personal representative may need a court order to confirm a distribution plan among creditors and beneficiaries.

8. Final accounting and distribution

After paying approved claims and obtaining any court approvals, the representative prepares a final accounting. The accounting shows collected assets, paid claims (including compromised amounts), administration expenses, and proposed distributions to beneficiaries. The court will review the accounting and typically must approve final distributions.

9. Personal representative’s duties and potential liability

The representative has a fiduciary duty to act in the estate’s and beneficiaries’ best interests. Improper payments, failure to follow statutory notice and claims procedures, or inadequate documentation can expose the representative to personal liability. When in doubt, consider court guidance or counsel before settling large or disputed claims.

When to get a lawyer

You should strongly consider hiring an attorney when:

• Claims are large, complex, or disputed;
• Creditors or beneficiaries threaten litigation or file objections;
• The estate has limited assets and you must prioritize claims or negotiate pro rata settlements among creditors;
• You are unsure how Colorado probate deadlines and priority rules apply to a claim.

Helpful Hints

• Track deadlines closely. Probate notice and claim deadlines matter — check the court’s instructions for your case.
• Insist on a written release. Never accept a verbal settlement without a signed release from the creditor.
• Prioritize secured claims and statutory priority expenses first. These often must be paid before general unsecured claims.
• Be transparent with beneficiaries. Providing regular updates reduces the risk of contested accountings later.
• Keep separate estate bank accounts. Mixing personal funds and estate funds creates accounting headaches and legal risk.
• If you settle for less than the claimed amount, note why you reduced it (lack of documentation, asset value, statutory defenses) to justify the compromise in the accounting.
• When a creditor refuses a reasonable compromise, consider asking the court to allow or disallow the claim instead of paying to avoid personal exposure.