Who is Responsible for a Deceased Family Member’s Debt?
After the loss of a loved one, one of the last things you want to consider is any debt they’ve left behind. When a family member dies, their assets, including life insurance policies, vehicles, real estate, bank accounts, and retirement investments, among other things, comprise their estate. The estate may be bequeathed to heirs, but it can also be used to settle outstanding debts of the deceased. A professional probate lawyer, such as The Mattar Firm, can help you and your family navigate what constitutes the estate and which debts will need to be settled from the estate.
The FTC and Your Loved One’s Debt
In the weeks following the death of your loved one, you may begin receiving phone calls from debt collectors. However, you may not be personally liable for a loved one’s debts. The FederalTrade Commission (FTC) is the nation’s consumer protection agency and has regulations in place that exempt family members from paying a deceased relative’s debts from their own assets. In addition, your family and your loved one’s estate may be protected by the Fair Debt Collection Practices Acts (FDCPA). This prevents debt collectors from using unfair, abusive, or deceptive practices when collecting a debt – including stating or implying that your own asset may be used to pay the deceased’s debt.
Debt collectors that the FDCPA refers to can be collection agencies, lawyers that work with collection agencies, and companies that buy delinquent debts and then try to collect on them. While unpaid debt can result in a court judgment, a good probate attorney can help guide you through settling a loved one’s debts.
What Happens to Debt When a Debtor Dies?
The estate fo the deceased is responsible for paying off debts – before any inheritance is dispersed. However, if the estate doesn’t have enough money to cover outstanding debts, it typically goes unpaid. You personally may be liable for the remainder of the debt, after the estate has settled what it can. If you’ve co-signed a loan or other obligation, or if you live in a community property state, you may be liable for your portion of the debt. Some states require the deceased spouse to pay for healthcare expenses, as well.
If you were legally responsible for resolving the estate, such as being the executor of the estate, and you failed to comply with probate laws, then you may be personally obligated to settle the debt. Again, The Mattar Firm can help determine which costs you’re responsible for.
Who Settles the Deceased Debts?
The actual payment of the debts typically is handled by the executor of the will. The executor is usually named in the will – when the will passes through probate, you’ll be made aware of it if you’re the executor. If someone dies without a will or hasn’t appointed an executor, then the probate courts will appoint an executor.
Under the FDCPA, debt collectors may discuss debt and payments with the surviving spouse, parents (for a minor child), children, guardian, or the executor of the will. Outside of these individuals, including those authorized to make payment from the estate, debt collectors may not discuss the debts with anyone else.
How to Deal With Debt Collectors
If you’re responsible for settling your loved one’s debt, expect debt collectors to contact you. They are legally allowed to collect your name and phone number in order to ask for the estate to settle the debt. However, if you aren’t familiar with your loved one’s financial state, you may be a target for scammers or thieves. Employ the help of a reputable law firm, such as The Mattar Firm, to sort through legitimate debt and arrange proper payments.
Debt collectors may only discuss the debt with the appropriate executor or controller of the estate. They may contact you; in order to stop contact from a debt collector, you must send a letter – not a phone call – to the debt collector stating that you don’t want the debt collector to contact you again. Save a copy for yourself and send the original out via certified mail, including a return receipt. Once the debt collector receives the letter, the only reason they can contact you again would be if they’re taking steps to retrieve the debt, including a lawsuit. While you may not be contacted by debt collectors, this doesn’t relieve you or the estate from debt obligations.
If your loved one died with debt, you may not be responsible for most of it. The deceased estate can pay the debt, although this may cut into any inheritance the estate has for you. To determine the validity of the debt, how to go about paying the debts from the estate, and setting up a repayment plan for debts that you are legally responsible for, you’ll need the services of an experienced estate planning lawyer. The Mattar Firm can help you here. Our team understands the law, both state and federal, as it pertains to wills, probate, and debts. Contact The Mattar Firm today for a consultation and let our team guide you through this troublesome time.