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Estate litigation: Fighting with creditors over a house

| Nov 13, 2019 | Estate Litigation |

In New Jersey, as in other states, when someone dies, his or her creditors have the right to be notified. They also have the right to make claims against the estate in an effort to collect what is owed to them. Creditors only have a short window to file their claims, but in that time, they can do a lot of damage. For instance, liens may be placed on property, such as a house, preventing beneficiaries from doing anything with it until the lien is dismissed or paid. Fights with creditors can, of course, lead to estate litigation, which can take time to resolve fully.

If a house with an existing mortgage is passed on to someone else when the owner dies, the mortgage doesn’t just go away. The lender may seek payment in full from the estate. If a lien is placed on the property, it means that the lienholder has the right to take the property if the lien is never paid or dismissed. The estate representative may pay off the debt with funds from the estate, or the beneficiaries may pay off the lien on their own if getting it dismissed is not an option.

As previously stated, creditors only have so much time to file their claims against an estate. If they miss their window, they may be out of luck. Once an estate is officially closed, however, if a mortgage lender really wanted to, it could file claims in a non-probate court against the beneficiary in order to seek the repayment of debt.

Closing an estate can be a messy affair. There is always hope that estate litigation can be avoided. Unfortunately, sometimes, it cannot be. Every case is different, and legal counsel can help one determine the best way to tackle this particular creditor issue when closing out an estate in New Jersey.