Many creditors, as common practice, docket their district court judgments in the corresponding circuit court and in the circuit courts of other counties to secure liens on the real property of debtors. Although a creditor may choose not to foreclose on the real property, generally the debtor will refinance his mortgage or sell his property, requiring the debtor to pay off the judgment to clear the title. Also, occasionally, debtors die with the lien in place.
When a person dies (“the decedent”), that person’s assets immediately pass to his estate, which is managed by a personal representative. Generally, the personal representative pays off the debts of the estate in the order established by Md. Code Ann., Est. & Trusts § 8-105 as long as the creditor timely presents a claim against the decedent’s estate as determined by Md. Code Ann., Est. & Trusts § 8-103. For many creditors, this is bad news, especially if the decedent’s estate is minimal, as general claims against the estate have the lowest priority under § 8-105.
However, if a creditor has successfully docketed a lien against property of the decedent prior to the decedent’s death, that creditor is a secured creditor. Secured creditors “may enforce a lien, to the exclusion of other creditors and without the necessity of notice of the claim to the personal representative.” Elder v. Smith, 412 Md. 288, 294 (Md. 2010) (citing Md. Code Ann., Est. & Trusts § 8-103 & 8-114).
Md. Code Ann., Est. & Trusts § 8-103(d) specifically exempts secured creditors from the general claim presentment requirement, stating “Nothing in this section shall affect or prevent an action or proceeding to enforce a mortgage, pledge, judgment or other lien, or security interest upon property of the estate.” Also, the prohibition against execution or levy against probate estate property under § 8-114 does not extend to the enforcement of pre-death liens. See Md. Code Ann., Est. & Trusts § 8-114.
Therefore, if a creditor secures a lien against a debtor’s property prior to the debtor’s death, the creditor is not required to present a claim to the estate. The creditor can enforce its lien to the exclusion of all other unsecured creditors.