Will A Family Member's Debt Haunt You After They Die?

by Katelyn Hayes   

debt liability and collection after death

Coping with a loved one's death is hard enough without the added emotional stress of handling the financial issues they've left behind. Often, a legal will saves you from the hardships of organizing and settling their debts. If a will exists, heirs can claim their inheritance only after the estate's settled remaining debts — starting with major secured loans and trickling down to credit cards, if there's enough to cover everything. Without a will, the state takes a large portion of the estate before the remaining assets are turned over to surviving relatives. Exactly how much depends upon the state.

But what happens when there aren't any assets to settle debts with? The easy answer is: nothing. If there's no money to claim, creditors are supposed to forgive outstanding debts.1 But that doesn't always happen. Aggressive creditors and collections agencies sometimes try to bully surviving family members to recoup what's owed.

Legally, they can't ask family members to take on debt.2 If it's not in your name — i.e., it's not a joint or co-signed account — you're not responsible, even if the deceased named you as an "authorized user" of their credit card.3

What to do when creditors harass you

  1. Send a copy of the death certificate to all creditors. Explain that there aren't assets and, therefore, nothing to recoup. You should also notify Social Security and credit reporting bureaus to ensure the deceased doesn't become an identity theft victim after death.
  2. Contact a lawyer if the harassment continues. Report the specifics about which companies are contacting you and how much they claim you owe. Let the lawyer handle it from there. Most likely, they'll threaten a harassment suit on your behalf.
  3. Block the collection agency's phone number. Being subjected to verbal attacks over the phone is the last thing you need while grieving. Simply eliminate the problem.

Exceptions to the rule

  • If you're the deceased's spouse, and therefore estate executor, you will be called upon to settle those debts on behalf of the estate using any remaining assets.
  • If you live in one of the eight community property states, you might be held responsible for debt your spouse incurred during your marriage.

Footnotes
1 "What Happens to Credit Card Debt After Death," CreditCards.com

2 "Debt Collection After Death," LawGuru.com

3 "Facing Debt After Death," NY Daily News, Feb. 19, 2008