Colorado Debt Payment Priority

When someone dies in Colorado, their debts do not disappear, and they do not all carry the same weight. Colorado law requires the personal representative to pay allowed claims against the estate in a fixed order before anything reaches beneficiaries. Follow the order and the statutes protect you. Pay out of order, and you can be held personally responsible for the shortfall.

C.R.S. 15-12-805 sets the classification and order of payment for claims in a Colorado estate. Colorado adopted the Uniform Probate Code, so these claims are resolved through the District Court of the county where the person lived, except in the City and County of Denver, where the standalone Denver Probate Court has probate jurisdiction. This guide walks through each class, what happens when the estate cannot pay everything, and how to protect yourself.

Why Priority Order Matters

In most estates there is enough money to pay every debt and still leave something for heirs. When that is true, the order creates little practical tension because everyone gets paid.

The order becomes decisive in two situations:

Insolvent estates: where debts exceed available assets. Someone will not be paid in full, and the statute decides who.
Premature payments: where the personal representative pays a lower-priority creditor or distributes to heirs before higher-priority claims are resolved, leaving nothing for a claim that should have come first. That mistake can fall on the personal representative personally.

Understanding the order also tells you when it is safe to distribute. Do not pay heirs until the creditor claim windows close and allowed claims are resolved. For the notice and claim-deadline mechanics that run alongside this order, see the Colorado creditor claims guide.

The Order of Payment Under Colorado Law

Under C.R.S. 15-12-805, when the estate's assets are not enough to pay all allowed claims in full, the personal representative pays them in this order. Each class is paid in full before any money reaches the next class.

Class 1: Property Held as Fiduciary or Trustee

Property the decedent held as a fiduciary or trustee, together with the expenses of administering that property, comes first. This is property that was never truly the decedent's to give away, so it is returned or accounted for ahead of the estate's own creditors.

Class 2: Other Costs and Expenses of Administration

The costs of running the probate itself come next. These make administration possible and include court docket fees, the personal representative's reasonable compensation under C.R.S. 15-10-602, attorney and accountant fees, appraisal costs, and publication charges for the notice to creditors. See the Colorado probate costs guide for how these are charged.

Class 3: Reasonable Funeral and Final Disposition Expenses

Reasonable funeral, burial, or cremation and other final disposition expenses follow. Colorado does not set a flat dollar cap in this section, but the expense must be reasonable given the estate. Document the basis for any amount you treat as reasonable.

Class 4: Debts and Taxes With Preference Under Federal Law

Debts and taxes that carry a preference under federal law come next, primarily unpaid federal income taxes and federal tax liens. Federal law governs its own collection priority, so these are addressed before Colorado-specific tax and debt claims.

Class 5: Reasonable Medical and Hospital Expenses of the Last Illness

Reasonable and necessary medical and hospital expenses of the decedent's last illness receive this priority. Bills tied to the final illness rank ahead of general unsecured debt. Medical bills unrelated to the last illness fall to the final class.

Class 6: Debts and Taxes With Preference Under Other Colorado Law

Debts and taxes that carry a preference under other Colorado law follow the federal-preference class. This covers state tax obligations and other state-law preference debts.

Class 7: The State Medicaid Estate Recovery Claim

The state Medicaid agency's claim for medical assistance paid on behalf of the decedent has its own class under C.R.S. 15-12-805(1)(f.5). It ranks below last-illness medical expenses and state-preference taxes but ahead of general unsecured creditors.

Class 8: Excess Public Assistance Claims

Excess public assistance claims of human services agencies, beyond the Medicaid recovery claim above, occupy this class.

Class 9: Child Support Owed at Death

Child support obligations that were due and unpaid at death, along with support the court determines is owed for a period after death, rank here. Only support owed at death, plus any court-determined future support, qualifies as an estate claim.

Class 10: All Other Claims

Everything that does not fit a higher class lands here: credit cards, personal loans, utility arrears, older medical bills, civil judgments, and most other unsecured debts. This class is paid last, and in an insolvent estate these creditors often receive a partial payment or nothing.

Within any class, no claim is preferred over another, and a claim that is already due does not outrank one that is not yet due (C.R.S. 15-12-805(2)).

When the Estate Cannot Pay All Debts

An estate is insolvent when its total assets are worth less than its total allowed claims. This happens more often than families expect, especially when most of the decedent's wealth passed outside probate through life insurance, retirement accounts, or joint accounts while the debts stayed in the estate.

In an insolvent Colorado estate:

Pay each class in full before moving to the next class.
If the money runs out inside a class, the creditors in that class share pro rata, meaning each receives the same percentage of their allowed claim (C.R.S. 15-12-805(2)).
Heirs and beneficiaries receive nothing until allowed claims are resolved. In a truly insolvent estate, they receive nothing at all.
Do not pay anyone out of order, and do not distribute to heirs, until you have classified every claim.

Example: An estate has $20,000 in available assets. Administration costs are $5,000 (Class 2) and funeral expenses are $6,000 (Class 3), leaving $9,000. A last-illness hospital bill is $4,000 (Class 5) and gets paid in full. That leaves $5,000 against $15,000 of credit card debt (Class 10). The card issuers share the $5,000 pro rata, roughly 33 cents on the dollar. Heirs receive nothing.

Protected Property

Two Colorado allowances sit ahead of most creditors, so account for them before paying general claims. The exempt property allowance (C.R.S. 15-11-403) sets aside a fixed value of estate property for the surviving spouse or dependent children. The family allowance (C.R.S. 15-11-404) provides support during administration. Both have priority over every claim except administration costs and reasonable final disposition and funeral expenses.

For deaths in 2026, the exempt property allowance is $44,000, and the personal representative may set the family allowance without a court order up to a lump sum of $44,000 or installments for one year. These allowances are separate from anything the spouse receives by will, intestacy, or elective share. See the Colorado surviving spouse rights guide for the current amounts, the deadlines, and how to claim them.

Colorado did not adopt a separate Uniform Probate Code homestead allowance (C.R.S. 15-11-402). Instead, the Title 38 homestead exemption protects home equity from creditors and survives for the surviving spouse and minor children, and the larger exempt property allowance stands in place of a homestead dollar figure.

Executor Personal Liability

Read this section carefully. A personal representative who pays out of order, or who distributes to heirs before higher-priority claims are resolved, can be held personally liable for the resulting shortfall.

Colorado ties this liability to the timing and order rules in C.R.S. 15-12-807. You are directed to pay allowed claims after providing for the allowances, for presented claims not yet resolved, and for claims that are not yet barred. You may pay a just claim earlier, but C.R.S. 15-12-807(2) makes you personally liable to an injured claimant if you paid early without requiring adequate security for a refund, or if your negligence or willful fault caused claims to be paid out of priority order.

Specific risk scenarios:

Paying a credit card balance (Class 10) before a confirmed federal tax claim (Class 4) is known or resolved.
Distributing to heirs before the creditor claim windows close and a valid, timely claim surfaces afterward.
Paying a lower-priority claim ahead of a higher-priority last-illness medical bill or the Medicaid recovery claim.

The safest practice is to wait out the claim period, classify every allowed claim, and pay in statutory order. When claims are large, disputed, or the estate looks insolvent, stop and consult a Colorado probate attorney before paying anyone.

Practical Steps for Executors

Step 1: Finish the inventory first. Know what the estate is worth before you evaluate claims. Colorado requires the inventory within three months of appointment under C.R.S. 15-12-706. See the Colorado personal representative duties guide.

Step 2: Publish and mail the notice to creditors. Publication starts the roughly four-month claim window under C.R.S. 15-12-801, and mailing known creditors starts a concrete 60-day clock for each of them.

Step 3: Do not pay the last class early. Wait for the claim windows to close and for higher-priority tax and medical claims to be confirmed before paying general unsecured debts.

Step 4: Evaluate every claim. A filed claim is not automatically a valid one. You may disallow claims that are invalid, inflated, or late, using the written disallowance process in C.R.S. 15-12-806.

Step 5: Pay in order and document everything. Keep a written record of each payment, the class it belongs to, the value of the estate, and the date each claim window closed.

Frequently Asked Questions

Does the family have to pay the deceased's debts from their own money?

No. In Colorado, debts belong to the estate, not to surviving family members individually. A relative is responsible only for a debt they personally co-signed or held jointly.

Are secured debts like a mortgage paid first under this order?

Not through this order. Funeral and administration costs come ahead of general claims, and the C.R.S. 15-12-805 order governs claims against general estate funds. A mortgage or other lien on specific property rides with that property. Under C.R.S. 15-12-803(3) the lien survives the claim bar, so whoever takes the house takes it subject to the mortgage.

Where does the Colorado Medicaid claim fit?

The state Medicaid estate recovery claim has its own class under C.R.S. 15-12-805(1)(f.5). It ranks below last-illness medical expenses and state-preference taxes but ahead of general unsecured creditors.

Can the personal representative negotiate a debt down?

Yes. You can negotiate with creditors, and many creditors in the last class will accept less than the full amount when the estate is insolvent or limited in assets.

Sources

Sources:

Title: Colorado Revised Statutes 2025, Title 15, Colorado Probate Code, C.R.S. 15-12-805 (classification and order of payment of claims), 15-12-801 (notice to creditors), 15-12-803 (limitations on presentation of claims), 15-12-806 (allowance of claims), 15-12-807 (payment of claims), 15-11-402 (no homestead allowance), 15-11-403 (exempt property), and 15-11-404 (family allowance). Publisher: Colorado Office of Legislative Legal Services. Publication Date: 2025 edition, accessed 2026-07-01. URL: https://olls.info/crs/crs2025-title-15.pdf
Title: Colorado Revised Statutes, official public access page. Publisher: Colorado General Assembly. Publication Date: Current official code, accessed 2026-07-01. URL: https://leg.colorado.gov/colorado-revised-statutes

This guide provides general information about Colorado debt payment priority in probate. Confirm the current statutory order and any deadlines with the District Court or Denver Probate Court handling the estate, or with a licensed Colorado attorney, especially if the estate may be insolvent. It is not legal advice.