Collecting Debt From Those Who Have Died: FTC Weighs In

Dealing With Debts of the Deceased

If you are getting calls from creditors or collectors about the debts of someone who has died, what should you do?

1. Understand whether you are personally liable. Did you cosign the loan? If not, you are probably not responsible unless the deceased was your spouse and you live in a community property state (see above). There are exceptions, of course, such as medical debts incurred for a minor child, or in some states, a spouse.

2. Identify who will handle claims from creditors. If there is a will or trust that identifies an executor, refer the creditors or collectors to that person. If no one has been appointed to administer the estate, then typically “the creditors become the executors,” explains Wiewel. “What happens is the court issues letters of administration that allow the executor to take to the (financial) institutions (holding assets) to request the money.”

[Resource: 5 Questions to Ask Before Using Retirement Funds to Pay Bills]

3. Find out whether there are assets in the estate that creditors can try to go after. Get legal help if you are not sure what assets belong to the estate, and of those, which are safe from creditors. A board certified estate planning attorney may be your best ally here. “Sometimes we have had cases where there is some property, some debt, and we will write creditors and tell them this is basically an insolvent estate and they have to sue if they want to get money,” Wiewel says. Find an attorney at WealthCounsel.com or NNEPA.com.

4. Avoid spending money that may belong to the estate until it’s settled. Don’t pawn mom’s jewelry or empty her safe deposit box until everything’s been taken care of. The last thing you want to do, Wiewel warns, is to be sued by a creditor after you’ve spent the money.

5. If a debt collector threatens or harasses you over the debt of someone who died, or even implies you have a moral obligation to pay the debt, complain to the FTC or talk with a consumer law attorney. Those threats may be illegal.

Are you being hounded for the debt of someone who has died? Share your story in the comments section.

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