Debts and the Deceased

Many believe one’s debt is forgiven once they pass away.  More importantly for our purposes, do their beneficiaries? In general, the rules for handling the debts of those who have passed are fairly simple, but there are a couple of wrinkles that you should be aware of.

Generally speaking, the debts of the deceased must be paid, and are paid by the estate of the person who has died. If there isn’t enough money in the estate to pay those debts, then they simply go unpaid. Family members are legally protected from having to pay those debts. However, as always, there are some exceptions. You may be responsible for the debt if you:

  • Co-signed the obligation, like a car loan;
  • Are the deceased person’s spouse and live in a “community property” state, such as California;
  • Are the deceased person’s spouse, and live in a state that requires you to pay certain kinds of debt, like healthcare expenses;
  • Were legally responsible for resolving the estate and didn’t follow certain state probate laws.

The person in charge of settling the deceased’s debts is the one the will specifies to carry out their wishes—the executor. If there’s no will, the court may appoint an administrator, personal representative, or universal successor and give them the power to settle the estate’s affairs.

As you may be aware, most of the larger creditors and debt purchasers outsource the management and collection of debts owed by deceased consumers to third party debt collection agencies.  The law protects people—including family members like you—from debt collectors who use abusive, unfair, or deceptive practices to try to collect a debt.

Under the Fair Debt Collection Practices Act (FDCPA), collectors can contact and discuss outstanding debts with the deceased person’s:

  • Spouse
  • Parent(s) — if the deceased was a minor child, which is generally under age 18
  • Guardian
  • Executor
  • Administrator

Collectors can also contact any other person with the authorization to pay debts using the assets from the deceased person’s estate. Debt collectors may not discuss the debts of a deceased person with anyone else. But you do not have to pay them unless the debts fall under any of the conditions described above.

Though they are allowed to contact you, there are limits and you can request that they stop. To stop a collection company from contacting you, send a request in writing to the collector. A telephone call isn’t enough. Tell the collector you don’t want them to contact you again. Make a copy of the letter for your files, send the original by certified mail, and pay for a “return receipt” so you can document when the collector got the letter.

If you have problems with aggressive debt collectors you should report them to:

  • The Federal Trade Commission at ReportFraud.ftc.gov
  • Your state attorney general
  • The  CFPB

Debt collection laws vary by state, so check with your state attorney general’s office to understand your rights under your state’s law. Thanks to the Federal Trade Commission for the information in this article.