Creditors’ Claims and Insolvent’s Estate,
By Yahne Miorini, LL.M.
The Commonwealth of Virginia
notice before the creditor’s rights
form.
does not have a notice of
can be terminated.
sample form posted on the
publication of the appointment of
a personal representative of the
estate that will limit the period
for creditors to file a claim
against
the
estate,
like
the
District of Columbia or the State
of Maryland does. If a personal
representative
protected
wants
against
to
any
be
future
website of Fairfax Commissioner
1.) Regular Payment of Creditors
of Accounts.
Please note first, that if there is a
The Commissioner will endorse
Last Will and Testament, the
the date of filing on the claim
executor is usually requested
and sign the endorsement.
under the said Will to pay the
funeral
It is recommended that the debt
expenses first, prior to any
be corroborated. In Noland Co.
distributions.
v. Wagner2, the Supreme Court
testator’s
debts
and
unknown claims, the personal
representative
will
have
denied the claim because there
to
One of the first responsibilities of
request a Debts and Demands
a personal representative is to
hearing.
secure the assets of the decedent,
was no corroborated testimony.
Mr. Wagner was a general
contractor for the construction of
then to assess the debts.
buildings. The Noland Company
However, in Tulsa Professional
Collection
Services,
v.
Va. Code Ann. §64.1-171 et seq.
Pope1, the Supreme Court held
provides instructions on how
that if the identity of a creditor is
creditors can secure their debts.
known
“reasonably
Obviously, the creditor should
ascertainable” by the personal
submit the claim to the personal
representative of the estate, then
representative
the due process clause of the
Although there is no requirement
Fourteenth Amendment requires
that a claim be filed with the
that the creditor be given notice
Commissioner
by mail or such other means as
creditors should file their claims
are reasonable to ensure actual
or a written statement with the
or
Inc.
Commissioner
of
of
of
the
Incorporated filed a claim against
the
485 U.S. 478, 108, S.Ct. 1340, 99 L.Ed.
2d 265 (1988)
administratrix
Mr.
argued that it has a claim as
assignee for the value of an open
account which had been assigned
estate.
by the co-partner of Fred Hayes
and
J.
Herbert
Hayes.
The
Noland Company only provided
Accounts,
the testimony of J. Herbert
Hayes. The Court held that the
“precise nature of the required
Accounts.
corroboration or the weight to be
some commissioners provide a
Excerpts from teaching class, NBI 2008. All Copyrights Reserved.
of
Wagner, deceased. The company
There is no statutory format but
1
See in Exhibit A the
2
153 Va. 254 (Va., 1929)
Creditors’ Claims and Insolvent’s Estate,
By Yahne Miorini, LL.M.
corroborating
basis that the “note evidencing
evidence depends upon the facts
the debt was lost therefore Mrs.
of each particular case.” It further
Pinnell was required to bring an
noticed that Mr. Hayes needed
action under Code §8-517 against
corroboration because Mr. Hayes
the executor, and precluded from
could have been “the party
proving her claim before the
plaintiff in the motion”, and
Commissioner.”
court
should hold on paying any debts,
because of his present certain
noticed that “Mrs. Pinnell filed a
request the Debts and Demands
direct interest as he may “either
written statement of her claim,
gain or lose by the direct legal
setting forth clearly and fully its
operation of the judgment.”
basis”, notice was made, “…no
given
to
the
The
2.) Insolvent Estate and Debts and
Demands Hearing
If the personal representative is
uncertain of the solvency of an
estate, the personal representative
proceedings, and obtain an Order
of Payment of the debts.
i.
motion was made that the report
In
Bickers
Pinnell3,
v.
the
Supreme Court affirmed that the
creditor
had
provided
corroboration of her claim. Mr.
Bickers had borrowed $4,500
from his daughter, Mrs. Pinnell.
After his death, Mrs. Pinnell filed
of
the
Commissioner
husband and several checks that
jury be empaneled to inquire into
start the Debts and Demands
the claim.”
hearing
Therefore the
the
estate
excepted to the Commissioner’s
report allowing the claim, on the
office. The Commissioner will
allowed the claim.
set a time and place for receiving
Accounts’
proof of debts and demands
.
against the decedent or the
The vast majority of debts will be
paid
by
the
personal
however,
insolvent or certain claims are
not ripen. In the situation of an
insolvent
estate,
additional
procedures should be followed
by the personal representative.
3
of
the
order of the trial court and
sometimes the estate may be
of
contacting
Commissioner
$4,500, 4%.” The Commissioner
executor
by
Supreme Court affirmed the
representative;
The
Hearing
The personal representative shall
had the mention: “Int. Bond
of Accounts allowed her claim.
Demands
recommitted to him”… “or that a
that she had lost or misplaced it.
She provided testimony of her
and
be
a claim. She could not provide
the evidence of the note alleging
Debts
199 Va. 444, 100 S.E.2d 20 (Va., 1957)
Excerpts from teaching class, NBI 2008. All Copyrights Reserved.
decedent’s estate.
The notice
will be posted at least 10 days
before the date fixed for the
hearing at the courthouse, and
published in a local newspaper.
The Commissioner of Accounts
does not require having an
account of the estate, but the
personal representative should
inform the Commissioner of any
Creditors’ Claims and Insolvent’s Estate,
known
outstanding
claims
against the estate.
The personal representative shall
give notice in writing to any
claimant of a disputed claim at
The last known address of the
creditor should be used. There is
no specific form of notice. The
notice shall inform the creditors
their claim or a written statement
is sufficient evidence of the
before the Commissioner. This
claim, the Commissioner may
filing
direct the personal representative
limitations but only for the
or
a
period of the Debts and Demand
the
hearing. Therefore, in order to
validity or invalidity of a claim.
prevent the claim from being
Even though the Commissioner
barred
is not given explicit authority to
limitations, the creditor should
summon
bring an action for recovery or
the
creditor
to
to
start
establish
and
compel
the
attendance of witnesses and take
of their right to attend and
tolls
by
the
the
statute
statute
of
of
enforcement of such claim.
depositions, such powers are
present their claims, and their
implied from
right to obtain another date if the
receive
Commissioner finds that the
the
Commissioners
if the creditor would be bound by
Within 60 days after the hearing,
the power to
proof
However,
initial date is inappropriate, and
an adverse ruling.
In certain situations where there
procedure
least 10 days prior to the hearing.
By Yahne Miorini, LL.M.
and
Manual
of
the Commissioner of Accounts
demand.
will file a report of sufficiently
for
proven debts and demands with
Accounts4
the court. Creditors have 15 days
points to the facts that the
Finally, the
from the filing to file exceptions.
Commissioner is “not equipped
notice shall inform the creditors
There is no particular form or
to handle a hotly contested claim
of their rights to file exceptions
formality.
with many witnesses on both
with the judge in the event of an
specify with reasonable certainty
sides and complicated facts or
adverse ruling. The notice may
the particular grounds of the
law.” The Commissioner will
be sent “by regular, certified or
objections.
report to the court that it is
registered mail, or by personal
his/her recommendation that this
service.” I recommend sending
If there is an exception5, the
claim needs to have a separate
the notice by certified mail with
court examines it and may
procedure.
choose to confirm the report in
receipt requested because the
Code
The creditor must
personal representative will have
Va.
Ann.
to provide evidence of mailing a
provides that creditors shall file
whole or in part, return the report
§64.1-173
to
the
same
or
another
Commissioner, or empanel a jury
notice to the Commissioner.
4
Virginia Practice Handbook, 4th Edition,
by VA CLE
Excerpts from teaching class, NBI 2008. All Copyrights Reserved.
5
See Va. Code Ann. §26-33
Creditors’ Claims and Insolvent’s Estate,
to inquire into any matter which
ii.
By Yahne Miorini, LL.M.
given by a testator who is a
What kind of debts?
debtor to his creditor, “equal to
it deems appropriate.
Verification of Debt.
important
the
confirmed.
personal representative should
intent,
However, the creditor has a right
only pay the debts that exist. The
satisfaction of the debt.”
to
appeal
Finally,
is
the
a
6
personal
a
ensure
confirmation .
creditor
or
note
that
representative
that
the
the
shall
statute
of
beneficiary who did not file
limitations has not run, because it
exceptions to the report may file
would eliminate the debt.
Claim not yet due. Va. Code
the report.”
Ann. §64.1-174 set the rules for
If the report shows that some
claims that are not yet due. After
debts have not been paid, then
the account of the personal
the court may order the payment
representative has been approved
of the debts.
However, if the
and the Debts and Demands
personal representative learns of
Hearing, the court may request
a claim during this period,
that the personal representative
meaning before the order of
reserve an amount “to meet any
distribution is entered, this order
other claim not finally passed
shall not be entered until after
upon.”
“deemed
the
second
separation
the creditor within that 10-day
period confirms his/her claim,
the Commissioner shall schedule
be
clause
agreement
couple,
in
The
of
the
of
the
Mr.
Swan
promised to pay $166.67 a month
to Mrs. Swan until she died
provided
that
unmarried.
testate.
she
remained
Mr. Swan died
His Last Will and
Testament provided a bequest of
his ex-wife.
After his death,
Mrs.
asked
Swan
that
the
executor be required to account
to her the annuity of $2,000 a
provided
separation
to the creditor shall be given. If
to
facts were the following: Under
year
expiration of 10 days, and notice
under
agreement.
the
The
Compromise of Claim. Va. Code
executor and the Commissioner
Ann.
the
of Accounts considered that the
personal representative authority
bequest should be considered as
to compromise claims.
a satisfaction and performance of
§64.1-57(g)
gives
the separation agreement and that
a date for hearing the claim and
Election of a Legacy.
for reporting the claim.
under
Swan
v.
Finally,
Swan
7
the
Supreme Court held that a legacy
See Va. Code Ann. §26-34
absence of proof of the contrary
Swan
“a suit to surcharge and falsify
6
or greater than the debt”, is in
If no exception has been filed,
report
to
It is
7
117 S.E. 858 (Va., 1923)
Excerpts from teaching class, NBI 2008. All Copyrights Reserved.
the ex-wife “could not have the
benefit of both instruments, but
must elect between the separation
agreement and the provision in
Creditors’ Claims and Insolvent’s Estate,
By Yahne Miorini, LL.M.
the will.” It was further held that
a clear intention of the person
passes by right of survivorship.
“…it seems clear to us that, when
from whom it derives one that he
In Dolby v. Dolby,12 the Court
these
should not enjoy both.10”
held that the mortgage was a
two
provisions
are
considered in the light of the
testator's
situation
and
surroundings, and the general
plan which he had in mind in
making his will, as disclosed by
its various provisions, he did not
intend to include the annuity
among his debts, but designed to
satisfy that claim by the gift in
the sixth clause.”
The Court
personal liability of the estate
Mortgages.
type
of
Depending on the
mortgage
and
the
language in the Last Will and
Testament, the mortgage may be
a debt of the estate or not.
depends
upon
testator
has
whether
made
It
the
himself
personally liable for the debt. If
the decedent is personally liable
referred to the maxim “He who
for
seeks equity must do equity.8”
intestate, the mortgage is the
As a result, two principles of law
were set: (1) “the general rule
that a legacy given by a debtor to
his creditor equals to or greater
than the debt is, in the absence of
proof of a contrary intention,
deemed to be a satisfaction of the
debt” 9; and (2) “the principle of
equitable election whereby an
obligation is imposed upon a
party to choose between two
inconsistent or alternative rights
or claims in cases where there is
the
liability
mortgage
of
the
personal estate.
and
died
decedent’s
The surviving
and did not pass to the surviving
tenant. Mr. Dolby had purchased
a real estate property in his sole
name and executed a promissory
note secured by a deed of trust.
He later married and retitled the
property into his name and his
wife’s, as tenants by the entirety
with the right of survivorship.
Mrs. Dolby was not added as a
joint obligor on the note.
Last
Will
provided
that
and
the
His
Testament
personal
joint owner or the legatee has the
representative
right to demand the payment of
legally enforceable debts” but
the mortgage from the estate.
also said that the “executor shall
If the decedent dies testate
without any provision regarding
the
mortgage,
there
is
a
presumption that the mortgage
passes with the bequest of the
property
unless
the
testator
specifies otherwise11. This does
not apply when the property
shall
pay
“all
not be required to pay prior to
maturity any debt secured by
mortgage, lien or pledge of real
or personal property owned by
me at my death, and such
property shall pass subject to
such mortgage, lien or pledge.”
The executors filed a complaint
for aid and direction regarding
8
9
1 Pom. Ea. Jur. (2d Ed.) §465.
Stewart v. Conrad's Adm'r, 100
Va. 128, 135, 40 S. E. 624
10
Allison v. Allison, 99 Va. 472,
476, 39 S. E. 130
11
Va. Code Ann. §64.1-157.1 (A)
Excerpts from teaching class, NBI 2008. All Copyrights Reserved.
the payment of the mortgage.
12
694 S.E.2d 635 (Va., 2010)
Creditors’ Claims and Insolvent’s Estate,
By Yahne Miorini, LL.M.
The Court considered that two
liable for the obligation and the
each person furnishing services
questions were to be answered:
land remains the primary source
of goods
(1) whether decedent Dolby had
for the payment of the debt.
6. Debts and taxes due to the State
a personal obligation to pay the
debt, (2) whether the mortgage
debt is secured by real property
own by decedent upon his death.
The
Court
considered
that
decedent was personally and
of Virginia
If the estate is insolvent, the
Commissioner will want to have
an interim accounting to be filed
as soon as practical.
iii.
7. Debts due as trustee for persons
under
disabilities:
representative,
personal
guardian,
conservator
8. Debts and taxes due to localities
Order of Payment
solely liable for the note that he
of the state of Virginia
signed. For the second question,
Va.
the Court noticed that because
provides the order of payment in
There is no preference within a
the real estate property was held
case of an insolvent estate, as
class.
jointly with right of survivorship,
follows:
Code
Ann.
§64.1-157
The rights are fixed at death.
the real estate property was not
owned by the decedent upon his
death, because the real estate
property passed by operation of
law. Therefore, the debt could
not
follow
the
real
estate
property. If Mrs. Dolby would
have been jointly liable for the
note, then only half of the note
would have been part of the
1. Cost
and
expenses
of
2. Family
property,
allowance,
and
exempt
homestead
allowance
3. Funeral expenses not to exceed
$3,500
the
There is an exception to his order
of payment.
Va. Code Ann.
§64.1-157.1
provides
that
existing liens at the date of death
of the testator have priority over
4. Debts and taxes with preference
under federal law
the payment of other creditors
and legatees.
the last illness of the decedent,
If
There is no interest or attorney’s
fees upon insolvency14.
administration
5. Medical and hospital expenses of
estate13.
9. All other claims
This does not
apply to liens that would be
granted in the Will.
decedent
was
not
including
liable
for
the
persons attending to him not to
Va.
encumbrance, the estate is not
exceed $400 for each hospital
provides that creditors shall be
and nursing home and $150 for
paid
personally
compensation
13
See Brown v. Hargraves, 198 Va. 748,
751, 96 S.E.2d. 788, 791 (1957)
Excerpts from teaching class, NBI 2008. All Copyrights Reserved.
of
14
Code
in
Ann.
the order
§64.1-158
of their
Virginia Surety Co. v. Hilton, 181 Va.
952 (Va., 1943)
Creditors’ Claims and Insolvent’s Estate,
classification.
By Yahne Miorini, LL.M.
If there is not
show cause. The order of show
surviving
spouse
will
not
enough to pay a class, the class
cause must be published once a
renounce the will and such intent
will be paid ratably.
week for two successive weeks
shall be in writing.
in one or more newspapers as the
iv.
Show Cause Order
A contingent claim will not
court may direct.
prevent from distributing the
After six months of qualification,
the personal representative may
motion the court to make an
order to show cause against the
Order of Payment of the estate to
creditors and legatees of the
estate.
Under Va. Code Ann.
§64.1-179, this action can also be
brought
by
a
legatee
or
distributee. Usually, a Debts and
Demands hearing will first take
place.
The court will then order the
estate. The court will set aside
distribution with or without a
enough reserve for such a claim.
refunding bond.
The statute
requires a refunding bond if the
distribution is made before the
expiration of a one-year period.
Depending
on
the
statute,
beginning of the one-year period
starts from: (1) the date of death
(for
the
family
allowance,
exempt property and homestead
allowance, (2) the date of the
This will provide an Order of
Payment of the creditors and to
all other persons interested in the
estate of the decedent.
Any
person interested in the estate
filing of the Will (for a newly
discovered
Will
and
its
challenge), or (3) the date of the
appointment
of
the
personal
representative (when no Will was
will “show cause” to be named in
probated). This one-year period
the order “against the payment
corresponds
and delivery of the estate of the
descendent to his legatees or
to
the
right
to
challenge the Last Will and
Testament probate. The statute
provides that to be protected, the
distributees.”
personal
representative
have contacted the surviving
provides a form of notice for
spouse to ascertain that the
Code
Ann.
Excerpts from teaching class, NBI 2008. All Copyrights Reserved.
protects
the
personal
representative against creditors
but not against an improper
distribution of the estate to
legatees
or
distributes.
H.
Michael Deneka, Esq. in Winding
Up and Settlement of an Estate15
addresses
this
issue
and
recommends that in order to be
totally protected, the personal
representative should seek an
action for aid and direction.
Actually, Va. Code Ann. §64.1179 provides that “every legatee
or distributee …may, in a suit
brought against [the personal
representative] within five years
afterward”.
shall
§64.1-180
Va.
Please note that this procedure
15
Estate and Trust Administration in
Virginia, 3rd ed., by VA CLE publications
Creditors’ Claims and Insolvent’s Estate,
I
also
recommend
that
By Yahne Miorini, LL.M.
the
personal representative obtain a
letter from the IRS and a letter
from the Virginia Department of
Taxation stating that the decedent
and the estate of the decedent do
not owe any taxes.
Excerpts from teaching class, NBI 2008. All Copyrights Reserved.