How to Manage and Prioritize Creditor Claims During Estate Administration in North Carolina

Quick Answer

The personal representative must (1) publish and mail a notice to creditors, (2) collect and review each claim, (3) classify claims according to N.C. Gen. Stat. § 28A-19-6, and (4) pay them in strict order of priority. Failure to follow this order can create personal liability.

Detailed Answer

1. Give Statutory Notice to Creditors

• Publish a Notice to Creditors in a qualified newspaper once a week for four consecutive weeks. (§ 28A-14-1).
• Mail the same notice to all reasonably known creditors. (§ 28A-14-1(c)).
• The notice triggers a 90-day deadline for creditors to present claims. Late claims are barred (§ 28A-19-3).

2. Collect and Examine All Claims

• Use the AOC-allotted form to record the creditor’s name, amount, documentation, and date received.
• Reject, allow, or partially allow each claim within 30 days of receipt if possible (§ 28A-19-16).
• If you reject a claim, provide written notice so the creditor can file suit within 3 months (same statute).

3. Classify Each Claim Under § 28A-19-6

North Carolina ranks claims into eight classes. Pay each class in full before moving to the next.

1. Costs of administration (court costs, attorney’s fees, executor compensation).
2. Year’s allowance for the surviving spouse and minor children (up to $60,000 combined; § 30-15).
3. Funeral expenses up to $3,500 and final medical expenses up to $1,500.
4. Federal, state, and local taxes due at death.
5. Judgments docketed and liens perfected during life.
6. Public assistance claims (Medicaid estate recovery).
7. All other valid debts (credit cards, personal loans).
8. Insufficiently presented or late claims—pay only if assets remain after Classes 1-7.

4. Pay Claims Only When the Estate Is Solvent

• File an Inventory (§ 28A-20-1) to confirm liquidity.
• Delay distribution to heirs until you satisfy or reserve funds for all higher-priority claims.
• If the estate is insolvent, pro-rate payment within the affected class (§ 28A-23-5).

5. Keep Proof and Report to the Court

• Retain canceled checks, receipts, and settlement statements.
• Attach a claims worksheet to the annual and final account (§ 28A-21-2).
• The clerk will not close the estate until all priority claims show as paid or barred.

Helpful Hints

• Open a dedicated estate bank account—never mix personal funds.
• Calendar the 90-day claims window and the three-month lawsuit deadline for rejected claims.
• Request IRS and NCDOR payoff letters early; tax clearance can slow closing.
• Keep heirs informed. Surprised heirs often demand distributions prematurely.
• If real estate must be sold to raise cash, seek a non-intervention order or approval from the clerk before listing.

Need Guidance?

Mismanaging creditor claims can expose you to personal liability and prolong administration. Our North Carolina probate team has years of experience guiding personal representatives through every step. Call (919) 341-7055 today for a confidential consultation.