Respectfully Submitted by Cicely Nedd-Thomas
If a secured creditor presents its claim for payment as a matured secured claim, it is entitled to payment not withstanding that the claim has not yet matured (e.g. 15 years left on a 30 year mortgage) since the deceased obligor was personally liable on the note secured by a lien. A matured secured claim is a class 3 claim and, to the extent of the creditor's collateral, has priority over all other creditors except claims for funeral expenses and expenses of last sickness (up to $15,000), family allowance, and administrative expenses.
Alternatively, the secured creditor can present its claim as a preferred debt and lien.
If this election is made, the creditor waives its right to rely on the decedent's personal liability and looks solely to the security interest for satisfaction of the obligation. If the debt is not paid according to the terms, the creditor can foreclose on the lien. If the collateral is not sufficient to pay the claim in full, the creditor cannot collect the deficiency. In such cases, the claim, when allowed and approved, remains a preferred lien against the property securing the debt. It is not a preferred lien against the estate, but against the specific property securing the indebtedness.
Claims for child support at one time ended on the death of the obligor, however, many well drafted Divorce Decrees provide that the child support obligation survives the obligor's death. The duty of support now survives even if the Divorce Decree does not provide the language. The family code states that future payments of child support are discounted to present value and accelerated on the obligor's death. The courts in the divorce proceedings are now requiring the obligor to acquire life insurance to cover the child support obligation in the event the obligor dies before the child(ren) reach majority.
