Are the heirs responsible for a decedent’s debts?
When a person dies, any debts he or she owes can be collected from his or her estate. If there is no estate or if the estate is insufficient to pay all debts, then usually no one is liable; and the creditor is out of luck.
That’s the law. But the practice in the real world is something different. It is not uncommon for creditors of the deceased to call, write, and repeatedly badger (even harass) family members to pay all or a portion of the decedent’s debts. Let me say it again, family members have absolutely no responsibility for a decedent’s debts, unless they were a co-signor on a loan or otherwise assumed liability themselves.
The debt doesn’t disappear with the death of the debtor. The estate of the deceased person owes the debt. If there isn’t enough money in the estate to cover the debt, it goes unpaid. There are a few exceptions to this rule. A family member or friend may be responsible to pay the debt if 1) you co-signed for the loan; 2) you live in a community property state, such as California, where a surviving spouse may have liability; 3) state law requires a surviving spouse to pay certain kinds of debts like health care expenses; or 4) you were legally responsible as executor or administrator for settling the estate and didn’t comply with state law.
It the estate has insufficient assets to pay all debts, it is akin to bankruptcy. It is called an insolvent estate, and the law provides a system of priorities for who gets paid in full first. That fact has not stopped the burgeoning industry of debt collections from families of deceased persons.
Jessica Silver-Greenberg writing for the Wall Street Journal says: “No one knows the size of the death-debt collection business, but it appears to be growing, according to court records, regulatory filings and interviews with dozens of lawyers and industry experts. The Federal Trade Commission investigated the industry and issued new guidelines in July after receiving numerous consumer complaints. William Howard, a consumer-rights lawyer with Morgan & Morgan in Tampa, Fla., says he has represented 50 people pursued for debts owed by dead family members so far this year, up from 10 in all of 2010. ‘Collectors are starting to realize just how much money you can get from someone when they are at their most vulnerable,’ he says.”
Some family members claim that debt collectors mislead them into believing they are required by law to pay the debts of deceased relatives. The debt collectors can threaten all sorts of things that are not in fact true or even possible. The collectors can be persistent – racking up hundred of harassing telephone calls to surviving spouses and other family members.
Family members of the deceased, just like all consumers, are protected by the federal Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from using abusive, unfair, or deceptive practices to try to collect a debt.
Collectors are allowed to contact third parties (such as a relative) to get the name, address, and telephone number of the deceased person’s spouse, executor, administrator, or other person authorized to pay the deceased’s debts. Collectors usually are permitted to contact such third parties only once to get this information. The main exception is if a collector reasonably believes that the information provided initially was inaccurate or incomplete, and that the third party now has more accurate or complete information. But, collectors cannot say anything about the debt to the third party.
Even if a third party is authorized to pay a deceased person’s debt, the third party can stop the debt collector’s contacts. The third party must send a letter to the collector stating that he or she does not want the collector to contact him or her again. The letter should be sent certified mail, return receipt requested so there is proof of mailing and receipt.
David Streitfield, writing for the New York Times, says that collecting money from relatives of decedent’s is one of the healthiest parts of the debt-collecting industry. “Some relatives are loyal to the credit card or bank in question. Some feel a strong sense of morality, that all debts should be paid. Most of all, people feel they are honoring the wishes of their loved ones.” Usually these people do not understand that they have no legal liability.
If you get a collection call for a family member who is deceased what should you do? First, do not give any of your own personal information such as your social security number. Find out who is the debtor, who is calling to collect, the account number, the amount, and any relevant information. Forward this to the executor or administrator of the estate if there is one. If you have any doubts about whether or not you might be liable, contact your lawyer.