When I was in my late teens, my father died. He wasn't feeling well one evening so he went to bed early...and just never woke up. He left behind some debts that ended up in collections and before too long, collectors were calling our house on a semi-regular basis. My mother wasn't emotionally capable of taking these calls, and I was trying to take care of her the best way I knew how: by fielding away my father's creditors. My story to any collection agencies that called was that my mother had packed her bags and left myself and my father three years prior and I had no idea where to find her. Once I even mustered up some fake sobs and asked the collection agent if he found her, would they please call and tell me?
Long story short, I didn't have to give the collection agencies a lie when they called to collect after my father's death. If I had a time machine, one of the things I would do is go back in time and give my young self instructions on how to handle this. I can't do that, but I can give those instructions to you.
But first, the basics.
Debt After Death: The Probate Court
When a person dies, that individual's estate goes into probate. The estate isn't limited to property the deceased owned, but encompasses all of his/her worldly assets (there are some exemptions that are not included in the estate, but they aren't relevant for the purpose of this post). It's the creditors' responsibility to file claims with the probate court against the estate within the time limit set by the state. At the end of the probate period, the court "settles" the estate by paying off creditors that filed legitimate, timely claims and turning the remainder of the deceased's assets over to his heirs.
Oftentimes, there are creditors that don't get paid. Those creditors, unwilling to do what they're supposed to do and write off the account as a total and complete loss, "accidentally" sell that account to a collection agency. Thus, they get some scratch for the debt while simultaneously passing the buck to someone else.
The natural course of events transpires and debt collectors begin calling the deceased's house nonstop. The surviving family members inform the bill collectors that the debtor is dead, but the debt collectors don't believe that. The family might even send the collection agency a copy of the death certificate. Sometimes, this is the end of the story, but more often than not the dog and pony show is just beginning.
You Owe Your Dead Parent/Husband/Wife/Brother/Grandmother's Debt!
First and foremost, debt collection is an industry with a high turnover rate. Agents don't stay at the job very long. It's just too disheartening and most people aren't nasty enough – or desperate enough – to make that a long-term profession. Because of this, bill collectors rarely have the training and experience necessary to know all of the small ins and outs of collection law – especially when it comes to the deceased.
|Make the collection calls stop|
To make matters worse, bill collectors work on commission. The more money they collect, the more money they make. This gives collectors who know better a strong incentive to toe the line of the law or even jump over it entirely. Most consumers know their basic rights, but have no idea how to handle debt collection activity after the death of a loved one.
So the debt collector calls and demands that you pay the debt of your husband/sister/brother/grandparent and you say..what? You've been put on the spot. You know nothing about this debt, but this person says you have no choice but to pay it. If the collector is particularly nasty, he'll threaten to do something like sue you, garnish your wages, take your car and home or ruin your credit rating. If you're like many scared consumers, you're blinded by grief and confusion and you either promise to make a payment or worse – give the debt collector your banking information to allow the company to debit the money directly from your bank account.
How the Law Protects Survivors
Here's the first thing you need to know. With few exceptions, you do not owe this debt. Let me say that again for emphasis. YOU DO NOT OWE THIS DEBT. Got it? Good.
The law is a grey area as to whether or not a bill collector who knows your loved one is dead can still call and ask you for payment. The Fair Debt Collection Practices Act makes it perfectly clear that collectors can only discuss the debt with the debtor, not a third party (in this case, you). But when the debtor is dead, the debt collectors almost always ignore this rule and, to the best of my knowledge, there's no case law on this yet.
But one thing is painfully clear: a bill collector can never, ever threaten someone with legal action they cannot actually take. The collectors cannot lie to you in an effort to scare you into paying off your dead loved one's debts. They'll do it without blinking an eye, but its illegal.
(If you're curious about just how low collectors will go to collect the debts of the deceased, this New York Times article, You're Dead? That Won't Stop the Debt Collector is both fascinating and cringe-worthy at the same time.)
What To Do When the Collection Calls Start
When your phone starts ringing off the hook with calls from collectors wanting you to pay off the deceased's accounts, your first course of action should be to inform the collector that the individual has passed away and ask for an address to send the death certificate to. Contrary to what you may believe, most debt collectors aren't evil beings sent from the bowels of Hades to terrorize the living. They'll give you the correct address and hang up the phone. So here we go, step by step:
1. Get a copy of your deceased loved one's death certificate.
2. Write a cease and desist letter to the collection agency noting that the only individual legally responsible for paying the debt in question is dead and that the company is not to contact his/her family members any further.
3. Mail the death certificate and cease and desist letter to the collection agency via certified mail with a return receipt requested.
4. Repeat the process for every collection agency that calls until the calls finally stop.
5. Sue at your discretion.
Exceptions to the No Liability Rule
In rare circumstances, family members can be liable for a deceased loved one's debts. Namely, if you were a joint account holder for the account or you live in a community property state that applies the community property rules to debt as well as assets. That's important. Collection agencies and creditors alike would love for all consumers to believe that living in a community property state is enough to be saddled with their spouse's debts upon their death but it simply isn't the case. All community property states treat debt after death differently, so know your state's rules before you assume you have to pay your deceased family member's collection debts after they're gone.