Debt of a Loved One After Death

Adam J Krohn
November 3, 2013

When a loved one dies it can be difficult to cope, not only with the death but also with the added pressure of creditors who call to collect debts. You may question whether the debt collector can collect on the debt from family members. The answer to that question depends on several factors. Our experienced Fair Debt Collection Practices Act (FDCPA) attorneys at the Consumer Law Center explain these various factors.

Are a deceased person’s family, friends, or heirs responsible for debts?

When a person takes out a credit card in their name, they are agreeing to repay the amount they borrow. The obligation does not extend to the debtor’s family (and in most cases even the debtor’s spouse), regardless of whether the debtor is alive or dead. While the deceased’s heirs can inherit the possessions of the deceased, they do not inherit their credit card debt and are not required to pay them. An exception to this is if another person was jointly liable on the debt with the deceased. In this case, a joint account holder is generally responsible for the entire debt, even when all charges were made by only one holder.

Creditors should be directed to the executor

Debts do not just go away when a person dies. They are transferred to the deceased person’s estate. There will be an executor or administrator to the estate who is designated by the will and affirmed by the court to handle the financial issues of the deceased. This includes their debts. If you are receiving calls about debt collector and you are not in charge of the estate, you should direct those calls to the executor and tell the caller that you do not want them to contact you again.

Notify all creditors and credit bureaus

Creditors should be notified by the executor of the estate of the death as soon as possible. The big three credit reporting agencies should also be notified and flagged as “Deceased: Do not issue credit.” Additionally, a copy of the deceased’s credit report should be requested to determine what debts are outstanding.

Determine who is responsible

People who have requested credit together are equally responsible for the entire debt. Co-signers, essentially a person who guarantees the borrower’s debt are also liable. However, authorized signers or additional cardholders are not liable (even if the debtor dies) since they were not the ones who applied for the credit.

Stop using the credit accounts

Authorized users on a credit card account should not continue to use the card after the death of the main cardholder. Since he or she is not liable for the debt, this may be considered fraud. Surviving spouses can request a card to be issued in his or her own name. However it will likely be a new card application based only on the credit history and income of the survivor.

Don’t start distributing the property

Assets should be distributed only after the estate has settled its debts. If property is distributed first, and the estate does not have enough to pay its debts, the heirs may then become responsible for the debt.

Ask for help from creditors

Something may be worked out with creditors if a surviving spouse is a joint account holder on the credit card of the deceased, and s/he is having trouble paying the bills.

Community property states

If you live in a community property state, a spouse can be liable for the debts of another. This happens even if they did not agree to the debt or did not know about the debt. Therefore a spouse may be liable for credit card debt of their deceased spouse.

Lenders lose when an estate cannot pay

There are cases where an estate has more debts than they have assets to pay them. If there is no one else who can be found to be responsible for the debt, the creditors will have to write it off.

Our experienced attorneys here at Krohn and Moss Consumer Law Center have also provided many helpful resources regarding the FDCPA and how debt collectors should act. For more information, click here to learn more about this act and how it can help you.

We understand the frustration you may have when dealing with an aggressive debt collector. We have been successfully representing those abused and taken advantage of by debt collectors for years, and have a long list of successful stories to share with you. We offer a FREE CASE REVIEW for you to assess whether we can assist you with your matter. Please do not hesitate to contact us toll free at 1-800-875-3666 if you prefer to talk to a trained professional over the phone instead, or of course, visit our website at http://www.westopdebtcollectors.com