Probate Q&A Series

Detailed Answer

When a decedent leaves behind corporate debts or a business facing bankruptcy, the personal representative must protect the estate while following North Carolina law. You act under Chapter 28A of the North Carolina General Statutes to collect assets, evaluate claims, and pay valid debts in the proper order.

1. Determine the Decedent’s Business Interests

First, review the decedent’s corporate records, stock certificates, partnership agreements or membership interests. If the decedent owned shares in a corporation or membership interests in an LLC, the estate holds only those ownership interests—not the company’s assets. However, if the decedent signed a personal guarantee on corporate loans, the estate may face liability beyond share ownership.

2. Give Notice to Creditors

Within one month of appointment, publish notice to creditors in a qualifying newspaper and mail individual notices to known creditors. This process follows G.S. §28A-19-2 and starts the statute of limitations for filing claims against the estate.

3. Evaluate Corporate Debt Claims

When creditors present claims for corporate debts, verify whether the decedent personally guaranteed those obligations. If the estate faces corporate debt claims due to a guarantee, you must allow or deny them under G.S. §28A-19-3. File objections early if you believe a claim is invalid or duplicates another.

4. Address Business Bankruptcy

If the business files a Chapter 7 or Chapter 11 bankruptcy after the decedent’s death, the personal representative should:

  • Notify the bankruptcy trustee of your appointment and the decedent’s interest.
  • File a proof of claim if the estate holds any creditor position or unmet distributions.
  • Monitor corporate distributions to protect the estate’s ownership interest.

Conversely, if the decedent filed a personal bankruptcy that included business debts before passing, you must treat those discharged obligations as closed by the bankruptcy court. Confirm the discharge order with the clerk of court.

5. Pay Valid Claims and Distribute Remaining Assets

After allowing or contesting claims, pay valid estate debts in the priority set by G.S. §28A-13-3. If corporate debts exhaust estate assets, obtain court approval before closing the estate. If assets remain, distribute per the will or North Carolina intestacy law.

Key Takeaways

  • Review corporate ownership and any personal guarantees.
  • Publish and mail notice to creditors under G.S. §28A-19-2.
  • Allow or dispute claims for corporate debts per G.S. §28A-19-3.
  • Participate in business bankruptcy by filing proofs of claim when needed.
  • Follow G.S. §28A-13-3 to pay valid debts and distribute remaining assets.

Contact Pierce Law Group

Handling a decedent’s corporate debts and potential business bankruptcy requires careful attention to North Carolina law. Pierce Law Group has experienced attorneys ready to guide personal representatives through every step. Reach out by emailing intake@piercelaw.com or calling (919) 341-7055 for a consultation.