Managing Debt

Collecting Debt From Those Who Have Died: FTC Weighs In

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Dealing With Debts of the Deceased

If you are getting calls from creditors or collectors about the debts of someone who has died, what should you do?

1. Understand whether you are personally liable. Did you cosign the loan? If not, you are probably not responsible unless the deceased was your spouse and you live in a community property state (see above). There are exceptions, of course, such as medical debts incurred for a  minor child, or in some states, a spouse.

2. Identify who will handle claims from creditors. If there is a will or trust that identifies an executor, refer the creditors or collectors to that person. If no one has been appointed to administer the estate, then typically “the creditors become the executors,” explains Wiewel. “What happens is the court issues letters of administration that allow the executor to take to the (financial) institutions (holding assets) to request the money.”

[Resource: 5 Questions to Ask Before Using Retirement Funds to Pay Bills]

3. Find out whether there are assets in the estate that creditors can try to go after. Get legal help if you are not sure what assets belong to the estate, and of those, which are safe from creditors. A board certified estate planning attorney may be your best ally here. “Sometimes we have had cases where there is some property, some debt, and we will write creditors and tell them this is basically an insolvent estate and they have to sue if they want to get money,” Wiewel says. Find an attorney at WealthCounsel.com or NNEPA.com.

4. Avoid spending money that may belong to the estate until it’s settled. Don’t pawn mom’s jewelry or empty her safe deposit box until everything’s been taken care of. The last thing you want to do, Wiewel warns, is to be sued by a creditor after you’ve spent the money.

5. If a debt collector threatens or harasses you over the debt of someone who died, or even implies you have a moral obligation to pay the debt, complain to the FTC or talk with a consumer law attorney. Those threats may be illegal.

Are you being hounded for the debt of someone who has died? Share your story in the comments section.

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  • Daniel orona

    In new mexico if my father was receiving a monthly income via a llc inheritance from his parents can creditors make claims against this income to pay any debt at his death?

    • Credit.com

      Daniel — they can if the inheritance was part of your father’s estate. Even then, as Gerri states, “certain kinds of assets are not subject to the claims of debt collectors, or creditors, because they don’t go through the probate process and instead pass directly to the deceased person’s beneficiaries.” To find out for sure, we’d advise consulting with an attorney familiar with estates, family wills and inheritance issues. Please do keep us posted on what you find, it may be helpful for other readers that might be going through a similar issue.

  • http://www.credit.com/ Credit.com Credit Experts

    Credit card accounts should be closed when a primary user dies. You’ll find more information on death and credit here:
    Who Pays Your Credit Card Debt When You Die?

  • Chris S

    I had got some work done on a tractor a couple months ago, where they quoted me a small amount to do the work but ended charging 5 times more. Well they ended up charging my fathers name who has been deceased for nearly 3 years and the probate is coming to an end this month where all funds and real estate are being put into a trust account. Are they able to take my father to collections if the probate is closed and all funds are in trust?

    • http://www.Credit.com/ Gerri Detweiler

      The short answer is I don’t know. They can try to make a claim against the estate but if the executor disputes it then perhaps they will figure out that they have the wrong person and try to collect from you. Sounds like a bit of a mess.

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