Debt After Death – What You Need To Know.

The call of a debt collector and the talk about money is one of the last things you want to hear when someone passes away but it is something that as a family must have to take care of. Family members usually are left to make financial decisions on behalf of their loved one. These financial decisions often involve to cover any debts owed by the debtor even after death including car loans, student loans, mortgage, credit card debt and other obligations. It is not relatives’ responsibility for paying debts despite some creditor would make them believe it other creditors left to swallow the cost of the debt. What you and your family need to know about debt after death and circumstances where others are responsible must be considered. You can represent “others” if you are spouse or direct family which are generally responsible for paying debts if you are co-signed for a loan, you are a joint account holder or spouse in community state of property. Debt can´t be shared unless there is a co-signer It is not true that debt pass on to family members or relatives. The person who dies is still the owner of the account with his/her name and any creditor can make others pay off the debt. Each creditor must assume the loss when a client dies with debt and no assets available to pay it off. In some cases there is a co-signer who become fully liable of any debt to an account and it involves much more than just helping with credit checks and managing the account. If you co-sign a mortgage, any loan or credit card, it means that you will pay in full the primary account holder can´t including missed payments due to death. You should also considerate some loan services that may contain a provision which become fully payable upon either the primary holder of the account or the death of the co-signer. Usually, it may be required to refinance the loan, take a negative hit to the credit in case the original loan defaults or raid the retirement account. Spouses share liability Spouses are usually an exception to the inherited rule of the debt in the case of some states that hold spouses liable for debt of partner even if it is not a joint account, they may still share liability for individual accounts. It is common to happen with any community property states that you may acquire during your marriage they will become marital debts regardless of whose name is on the account and also a court can make you responsible as the spouse based on how you have been beneficiated from the debt even though you didn’t signed for it. It becomes the responsibility of both death and alive spouses for responding to creditors if debt beneficiated both of them or the household as a whole. Creditor will always ask for payments Debt collectors can contact deceased´s family, spouse guardian, administrator or anyone responsible to discuss the debt under The Federal Trade Commission rules but they cannot mislead family members into thinking it is an obligation. Even though it is not your obligation to pay for debts it doesn’t mean creditor won´t ask you to do it and try to guilt you into it. It is better for you as the deceased´s family to tell creditors that never contact you again and they must follow and honor your request. If you assume for a second legal responsibility or try to negotiate paying in part or in full, even just to get them off the phone, they will have your words as a proof of your entire debt responsibility. Sometimes creditor make claims against the estate and debt may not be inherited but your inheritance can be reduced when creditors get first rights to any property to the amount of the outstanding debt in the estate up. Even when families left to an individual in the will it can be applied and creditors can foreclose and take family home for a mortgage. You may have to buy the property from the estate with its fair market value if you want to keep a specific property and the estate does not have enough cash to cover outstanding debts. But creditor only have and specific and set period of time to make claims and after that any claim will be forfeited. Trying to keep creditors in the dark is a way to avoid them but you may need to file in probate court, take some actions or notify creditors directly because failing on following the rules can leave creditors with more time to make claims and putting debts on to you. Managing credit and debts Credit accounts should not be used for paying funeral expenses or family agrees as it can be considered fraud if the account is not in your name. Commonly families don’t have legal authorization to pay bills with a loved one´s account. It is better to notify the bank or the entity involved that you received a bill to cancel the account and contact the executor of the estate. The three major credit bureaus must be notified when someone pass away to prevent identity theft for opening new accounts or making transaction in their name, also a copy of their credit report to identify debts can be requested. Some documents such as the certificate of death are important for most of the tasks you may handle with a creditor or any financial institution for closing or managing deceased´s account. This certificate gives you legal authority to take some actions and avoid people faking deaths. The fair Debt Collection Practices Act still applies after death and you should consider this in case creditors lie about your responsibility for debt or wrongly report your love one´s debts you can use this information to have your credit report cleaned . Check if there is insurance policy It is very important to check if the person who died took out any insurance policy to pay off the debt such as life insurance to pay off the mortgage. Terms of the policy must be checked in case there is insurance policy to understand what you can claim and pay for. When there is no insurance policy to cover debts after death you will need to contact creditors to get them notified and decide what the following actions are. Protecting yourself during a difficult time when someone you love pass away can be hard and sometimes it is better to sign up for credit monitoring and other services and keep you away from unscrupulous debt collectors and other credit and debt issues they may represent.