Debt after Death: Who Pays?

The death of a loved one can be traumatic enough without the financial concerns that often accompany dying. Nevertheless, those financial realities exist and cause unnecessary stress for many survivors. Here’s a look at what laws govern debts for those who have passed away.

Beyond the Probate Process

A few decades ago, the standard process for collecting debts after a person’s death was to go through the probate court. Probate court worked like this:

  • Claims submitted: Creditors and debt collectors would submit claims for debts to the estate of the deceased.
  • Executor makes payments: The individual charged with handling financial transactions for the deceased (called the executor or administrator) would pay all claims that were feasible. In other words, the executor paid what was possible to pay given the value of the estate’s assets.
  • Heirs get the rest: Any money or assets not collected by creditors could then be distributed among the survivors.

While the probate process seems more or less straightforward, it often took considerable time, as many claims had to go through court. To smooth the road for people without significant assets, many states passed laws that permitted a less formal means of handling the debts of the deceased.

The less formal processes often go more quickly, but can be confusing to debt collectors and creditors. This, in turn, can lead to problems for survivors who are improperly contacted with requests to repay debt.

How to Handle Creditor Calls Concerning the Recently Departed

After a debtor’s death, debt collectors may call that person’s relatives because of legitimate confusion about who has responsibility for repaying a debt. Of course, that doesn’t mean that debt collectors can hound someone’s survivors or pressure them into paying debts they don’t legally owe.

The rules governing debt collection after death state that:

  • Some debts may go unpaid. If a family member’s estate was insufficient to cover debts, those debts (in many cases) simply go unpaid. Unless the deceased was your spouse, you likely do not have any legal obligation to repay his or her debts.
  • Spouses are most likely to owe. Assuming anyone is responsible for a family member’s debts, that person is likely the spouse, especially if the couple lives in a community property state. Still, there are lots of rules and exceptions, so anyone unsure of whether or not to pay a debt may want to contact a lawyer.
  • Debt collection laws apply. The Fair Debt Collection Practices Act outlines the rules debt collectors must follow in order to legally collect on any kind of debt. Those rules require civil contact and prohibit contact that could be considered harassing, demeaning, or dishonest.

Bottom line: if someone contacts you about repaying a loved one’s debt, don’t write a check before you check the laws in your state.

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