Fairfax, VA Probate Blog

Tuesday, March 18, 2014

Probate Estate: Order for Paying Creditors

Every personal representative who is authorized to pay the creditors of the estate shall do so in order of priority. Failure to pay the creditors as required by statute can expose the personal representative to personal liability for the debts.

No payment shall be made to creditors of any one class until all those of the preceding class have been fully paid, and if the assets are not sufficient to pay all the creditors of any one class, the creditors of such class shall be paid ratably; but a personal representative who, after 12 months from his qualification, pays a debt or demand of his decedent is not personally liable for any debt or demand against the decedent of an equal or superior class, whether it is of record or not, unless he had notice of such debt or demand before making such payment.

The Virginia Code provides the following order for the payment of creditors. Please note that, as it pertains to the identification of Classes of Claims within any subgroup, the analysis is complicated and requires legal analysis by an attorney.  

When the assets of the decedent in his personal representative's possession are not sufficient to satisfy all debts and demands against him, they shall be applied to the payment of such debts and demands in the following order:

1. Costs and expenses of administration;

2. The allowances provided in Article 2 (§ 64.2-309 et seq.) of Chapter 3;

3. Funeral expenses not to exceed $3,500;

4. Debts and taxes with preference under federal law;

5. Medical and hospital expenses of the last illness of the decedent, including compensation of persons attending him not to exceed $400 for each hospital and nursing home and $150 for each person furnishing services or goods;

6. Debts and taxes due the Commonwealth;

7. Debts due as trustee for persons under disabilities; as receiver or commissioner under decree of court of the Commonwealth; as personal representative, guardian, conservator, or committee when the qualification was in the Commonwealth; and for moneys collected by anyone to the credit of another and not paid over, regardless of whether or not a bond has been executed for the faithful performance of the duties of the party so collecting such funds;

8. Debts and taxes due localities and municipal corporations of the Commonwealth; and

9. All other claims.

No preference shall be given in the payment of any claim over any other claim of the same class, and a claim due and payable shall not be entitled to a preference over a claim not due.

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