Death & Debt

When a loved one dies, his or her debt doesn’t disappear. That doesn’t necessarily mean you’re responsible for it, either.

Debt collectors will still call. Some will be sensitive to your loss. Some could not care less. I want to help you know what, if any, your responsibilities are in dealing with the debt of a deceased loved one — and what collectors can and cannot do in the process of trying to collect payments.

Jesse Campbell, content manager for Money Management International, said typically, individuals are not responsible for their deceased loved one’s debt. It’s the deceased’s estate that may be liable for it. “The exact rules and methods will be different in every state, but generally the assigned executor of the deceased’s estate will be responsible for paying back the deceased’s debt using the deceased’s available assets,” Campbell said. “Only after these debts have been cleared can the rest of the deceased’s assets be distributed to their heirs.”

There are exceptions, Campbell pointed out, when it comes to accounts with joint-ownership. “This includes life insurance policies, certain retirement funds and any accounts with right of survivorship or transfer-on-death provisions,” he explained. “That means that these exempt accounts can’t be confiscated to repay the deceased’s debts.”

Campbell and the Federal Trade Commission (FTC) identified four circumstances in which the deceased’s heirs, relatives or spouse may be responsible for the debt:

  • If they co-signed on the debt
  • If they are the deceased person’s spouse and state law requires that you repay a particular type of debt, such as health care expenses
  • If they were legally responsible for resolving the estate and didn’t comply with certain state probate laws
  • If they are the deceased person’s spouse and they live in a community property state

“In a community property state, you would be responsible for repaying your deceased spouse’s individual debts (assuming the debt was created during the marriage),” said Emmanuel Rivero, director of the Hispanic Centers for Financial Excellence for Money Management International. “There are a few exceptions, and they can differ from state to state so it’s important to seek legal counsel on these matters.” Neither Tennessee, Arkansas, nor Mississippi is a community property state.

As far as collectors, FTC Consumer Education Specialist Ari Lazarus said federal law limits whom they can solicit about the debt. He said they can only solicit the deceased’s spouse, parent (if the deceased was a minor child), guardian, executor or administrator — or anyone the estate has authorized to pay the debt. Federal law, specifically the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq., prohibits collectors from continuing to solicit consumers who have put them on written notice that they do not owe the debt. The law puts the burden of proof on the collectors to prove those consumers are responsible for it.

With that in mind, attorney Kevin Snider of #WiseChoice law firm Snider & Horner, PLLC and I have crafted a “drop dead collection agency” letter template you can use to dispute your liability to any debt claim. All you have to do is get a physical address of the collection agency; copy, paste and fill in the blanks — then mail it to the collection agency via certified mail, return receipt requested. Under the law, the agency can no longer harass you about the debt unless it can prove you are responsible for it.

Losing a loved one is devastating enough. Losing an unfair battle with an unscrupulous collection agency over your loved one’s debt is obscene. Save and remember this #WiseAdvice so you can level the playing field against a brazen agency bent more on collection than on compassion.

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