Claims in independent administrations

(This is one of a series of posts about 2011 legislation.)

Section 146 addresses claims in independent administrations.  SB 1198 makes several changes:

• Section 294(d) permits personal representatives to give notices to unsecured creditors, and those creditors are required to present their claim within 120 days of receipt of the notice, or the claim is barred.  Section 146 makes it clear that Section 294(d) notices may be used in an independent administration.  However, when used in an independent administration, the notice also must include a statement that a claim may be effectively presented by only one of the methods prescribed by Section 146.  (Here are Section 294(d) notice forms for independent administrations which address the 2011 changes in Word and WordPerfect formats.) Section 146(b-4) prescribes these methods of giving notices by creditors:

  • A written instrument that is hand-delivered with proof of receipt, or mailed by certified mail, return receipt requested with proof of receipt, to the independent executor or the executor’s attorney;

  • A pleading filed in a lawsuit with respect to the claim; or

  • A written instrument or pleading filed in the court in which the administration of the estate is pending.

  • A secured creditor electing matured secured status must give notice to the independent administrator in one of the methods prescribed in Section 146(b-4) (described above) and must record a notice of the creditor’s election in the deed records of the county in which the real property is located.

  • A secured creditor electing matured secured status in an independent administration is entitled to the priority granted by the Probate Code, but the creditor is not entitled to exercise any remedies in a manner that prevents the payment of higher priority claims and allowances and, during the estate administration, is not entitled to exercise any contractual collection rights, including the power to foreclose, without either the prior written approval of the independent executor or court approval. If the secured creditor elects matured secured status, the independent executor and not the secured creditor is empowered to sell the property if necessary to pay the claim. Still, the creditor with matured secured status is not powerless to protect itself.  Section 146(b-1)(2) permits the matured secured creditor to seek judicial relief or to execute a judgment against the independent executor. Section 146(b-1)(3) coordinates with the no right to exoneration of lien statute (Section 71A), requiring the independent executor either to collect from the devisees the amount needed to pay the debt or to sell the property to raise money to pay the debt.

  • A secured creditor with preferred debt and lien status is free to exercise judicial or extrajudicial collection rights, including the right to foreclose and execution, but the creditor may not conduct a nonjudicial foreclosure sale within 6 months after letters are granted.

  • In an independent administration, presentation of a statement of claim or a notice with respect to a claim to an independent executor does not toll the running of the statute of limitations with respect to that claim. Except as otherwise provided in Section 16.062 of the Civil Practices and Remedies Code, the running of the statute of limitations in an independent administration is tolled only by:

    • Written approval of a claim signed by an independent executor;

    • A pleading in a suit pending at the time of the decedent’s death; or

    • A suit brought by the creditor against the independent executor.

    • Section 146(b-7) states plainly that, other than as provided in Section 146, the procedural provisions of the Probate Code governing creditor claims in supervised (dependent) administrations do not apply to independent administrations.  Among the procedural provisions that do not apply to independent administrations are Section 306(f) – (k) and Section 313.  A creditor’s claim is not barred solely because the creditor failed to file a suit not later than the 90th day after the date an independent executor rejects the claim or fails to act with respect to a claim.

Section affected:  Probate Code Section 146.