Death is not a topic anyone wants to discuss openly. Secretly, though, we are concerned about it and its impact on our family and loved ones. Losing a loved one is always a time of high stress and confusion. Many issues that arise are somewhat expected: a mountain of credit card debt typically catches grieving family members by surprise and without the slightest clue about how to handle creditors.
There is no easy or simple answer to the question: what happens to your debts when you die? It is true that some kinds of the debts effectively die with you but it is also possible for your heirs to “inherit” some of your debts. What happens to the debts depends upon the nature of the debt and your estate planning.
The debts that Die With You
Generally, a debt that only belongs to one person such as a credit card becomes null and void when that person dies. Most credit card companies simply write off this debt because they cannot force the heirs or the survivors to pay it. This applies to most the consumer loans including car loans but there are exceptions.
It is possible for the creditors to try and collect from your estate but there are limits. A federal law called the CREDIT Card Act of 2009 lets the companies collect unpaid balances from estates but bars them from charging the estate additional fees after death.
This means that your estate but not your heirs would be liable for such a bill. It is rare; however for creditors to collect on this.
If some assets are left over the creditor could take action, they could repossess a car from an estate or foreclose on real estate if there is a mortgage. The laws in every state are different so it is a good idea to consultant an estate planner or probate attorney to see what the estate will be liable for.
Who Communicates with the Debt Collection Agency?
Anytime someone dies, there is an executor of the estate, and it is that executor who is responsible for dealing with debt that’s left behind. Direct all debt collectors to the executor, and tell them not to call you anymore.
The executor will take the information from each debt collector, and then when it’s time to disburse the estate, will see to it that the deceased debt is paid. If there isn’t enough in the estate to fully satisfy all of them, it will be divided up equally among them.
Many an unscrupulous debt collector will prey on the grieving during this time of loss, but don’t become a victim to them. Know your rights under the Fair Debt Collection Practices Act, and then make sure that you’re not taken advantage of. Here are a few things to keep in mind:
* If you do not want to communicate with the debt collector, write them a cease and desist letter telling them that, and then mail it certified mail, return receipt requested.
* If they continue to try and guilt you into paying the deceased debt, or try to shame you into paying it, record the call if your state allows it, and talk to a lawyer about filing a suit against them for violations of the Fair Debt Collection Practices Act.
* Some of the debt collectors will try and collect on false debts during this time, so make sure that the executor of the estate demands a debt validation letter from each debt collection agency before paying anything to them.
Jointly Held Debt
Almost any debt that is in your name only including utilities, credit cards, car loans, insurance policies will be written off when you pass on. Unfortunately if the debt is in another person name, for example, a credit card or mortgage jointly held by a husband and wife could get passed onto a survivor.
The surviving life partner would be liable for payments on a jointly claimed car or mortgage. He or she could also be held liable for service bills and tax payments.
In states with group property, for example, California, a mate could be held liable for a deceased life partner’s credit card and different debts. The creditors could take normal debt accumulations yet they cannot follow inheritances. Instead, they would have to pursue the survivor.
The length of the assets are in the estate they ought to be safe from debt accumulation endeavors.
It is workable for a man who is listed as an authorized client of a credit card to be held liable for an unpaid balance. This means it could be a smart thought for a life partner or other family member to keep his or her name off of a friend or family member’s credit cards in the event that he or she has a great deal of debt.
What to do When a Loved One Dies
The first and most important thing to do when a close family member dies is to experience all of their records and ascertain the amount of debt they had.
This means you may have to run a credit report on them and check whether there are any unpaid debts. In the event that there are check the records and see who is liable for that debt.
On the off chance that only the deceased individual is liable for it contact the creditors and inform them that he or she has kicked the bucket. In the event that the debt has been swung over to a gathering agency, you ought to contact the accumulation and let it know.
Now and again you may have to send the gathering agency or creditor a duplicate of the death certificate.
On the off-chance that there are any debts the estate is liable for make beyond any doubt they are paid out of assets in the estate or the extra security settlement.
Before you pay any of these debts you ought to research them and make beyond any doubt they are valid. On the off chance that they are not valid contact the creditor and inform them.
On the off chance that gathering endeavors continue you may have to take different actions, for example, hiring an attorney or reporting the collectors to regulatory agencies.