How to Handle Collection Calls For A
Deceased Person's Debt
Are you being contacted about a deceased person's debt? The last thing you
need when you are mourning the death of a loved one are calls from debt
collectors demanding that you pay his (or her) past due debts. Yet, collecting
the debts of the dead is a growing and lucrative market for debt collectors.
In fact, some debt collectors receive training on how to talk to the bereaved.
According to a New York Times article on the subject, one debt collection firm
even transfers grieving relatives to a grief counselor who tries to help them
cope with their emotions so that the collection firm will be more successful
collecting from the bereaved relatives at a later date!
Creepy, huh? And pretty outrageous too, especially considering that in many
instances surviving relatives are under no legal obligation to pay the unpaid
debts of their deceased loved ones. Sadly however, many relatives do pay
deceased persons debts out of a sense of obligation to the person they have lost
- even when it puts them in a financial bind.
Are You Responsible For Their Debts?
Here are the facts. Generally when someone dies, the outstanding debts of the
deceased are paid out of her estate during the probate process. If there is not
enough money in the estate to pay all of those debts, the unpaid creditors are
out of luck.
What's in an estate? An estate is all of the assets owned by the deceased and
it’s the responsibility of the deceased’s creditors to file claims for payment from
the estate with the probate court in the state where the deceased resided.
Certain assets may pass to beneficiaries or spouses outside the estate and so
they are not subject to claims against estate of the person who died. For
example, if your relative had a life insurance policy and named you as the
beneficiary, that money is yours, and cannot be taken by the deceased person's
creditors. Retirement accounts left to a beneficiary are usually protected as
well. Joint property you owned with the person who died may also be safe.
What is probate? Probate is a legal process for administering the estate of
someone who died. During probate, anyone who is owed money can file claims
with the probate court requesting payment from the assets in the deceased’s
estate. The "executor," or person managing the estate, pays as many of the
valid claims as possible out of available assets.
In many states, there are informal alternatives to the traditional probate
process that allow an estate to be handled faster, and more informally. (These
alternatives are also less expensive.) Also, some states allow small estates where there aren't many assets and the assets are not worth much - to avoid
probate all together. Instead, the deceased persons debts are settled through a
non-court process.
You May Be Personally Responsible If...
You may be personally liable for the debt of someone who has died in a couple
of situations:
You cosigned for the debt. You will be fully responsible for any joint debts
after the other borrower dies.
The person who died is your spouse. In this instance, you could have some
obligation to pay his or her outstanding debts. If you live in a community
property state: Alaska, Arizona, California, Idaho, Louisiana, Nevada, New
Mexico, Texas, Washington, and Wisconsin you may be responsible for debts
incurred by your spouse during your marriage even if you did not cosign. A
probate or estate planning attorney can help you determine whether that's the
case.
Of course, if your spouse left behind a large enough estate, all of those debts
will get paid through the probate process.
Warning! Don't get greedy!! When someone dies, his or her estate is supposed
to go through the probate process (or some other state-approved process)
during which as many of the deceased's debts as possible are paid out of the
assets in his or her estate. Only after that happens, can any assets that may be
left be distributed to the deceased's beneficaries. Therefore, if a relative of
yours dies and you and your siblings (or some other relatives) decide to avoid
the probate process so that there will be more of the deceased's estate for you
to divide up among you, the creditors of the deceased may be legally entitled to
come after you for the money they are owed.
Who Handles the Debts?
The tricky part for creditors and collectors has been trying to identify the person
responsible for handling the financial matters of the estate when there is no
formal probate process and no one has been named as executor.
In some states, where a less formal process has been developed, the person
handling the final matters of the estate will be called the "personal
representative" though there are other names for that role.
Don't be confused. Just because you are managing details like the funeral,
that does not mean you are responsible for handling the deceased persons
debts. Figure out who is going to be officially handling these matters and refer
all creditor calls to that person. Once a debt collector has located the person
acting as personal representative, executor or something similar, they must
stop calling anyone else.
Again, just because someone is named personal representative or executor,
that does not make them personally responsible for the deceased persons
debts.
What If There Is No Money to Pay Debts?
In this economy, many people will die with little or no assets available to pay
debts. If there are no assets to pay that person's debts and a creditor or
collector contacts you about paying them, you may want to simply send the
creditor and/or collector a certified letter stating that fact and instructing the
collector not to contact you again. (This is your right under the Fair Debt
Collection Practices Act.) Once a debt collector receives your cease contact
letter it must not contact you again, except to notify you of legal action (which
may not happen if there is nothing left to go after.)
If you aren't sure which assets of the deceased may be protected from creditors
(a vehicle, savings, jewelry, bank accounts etc.) we recommend you talk with
an attorney with experience in handling these kinds of issues.
Are Debt Collectors Harassing You?
The federal Fair Debt Collection Practices Act protects you when you are
contacted by a debt collector about a debt owed by a loved one who has
passed. Your state may also have a law that protects you.
Talk with a consumer law attorney right away if a debt collector is:

Pressuring you to pay debts of your relative that you are not sure you owe,

Implying that you have a moral obligation to pay the debt, or that the person
who died would have wanted you to pay the bill,

Threatening you with legal action or other severe consequences,

Harassing you or is saying negative things about you or the person who died,

Refuses to verify the debt or send you anything in writing,

Contacts you at the funeral or wake, or at another inappropriate place.

Doing something that you just feel isn't right, and you need expert advice.
If the collector breaks the law, you may be entitled to damages and the
collection agency may have to pay your attorney's fees as well. That means
the consumer law attorney may help you for free.
Information provided by DebtCollectionAnswers.com. For
more details, please visit their website.