There are a lot of moving parts that go along with the death of a relative. One of the biggest is what to do about the credit card or loan debt your loved one left. Will you be responsible for this debt? What should you do if a debt collector calls?
This guide will give you all the information you need to know so that you’ll know what your obligations are and what you should do if debt collectors won’t stop calling.
Will I be responsible for my relative’s debt?
The overall answer is no, but there are caveats. Generally speaking, relatives are not responsible for a deceased person’s debts unless:
- They’ve co-signed a loan with their relative
- They’re the spouse of a deceased person and live in a community property state
- They’re the spouse of the deceased person and live in a state where healthcare and medical expenses are required to be paid
- They were responsible for resolving the dead person’s estate and didn’t follow state probate laws
If you fall into any of these categories, you most likely will be required to settle your relative’s debts. If they’re still alive, consider discussing the options available to them now so that you’ll be debt-free should they pass. Send them useful links like this debt consolidation calculator so they can implement a plan now to save you unnecessary hardship later.
How are debts handled when someone dies?
The process of handling a deceased person’s assets has a thorough process behind it, legally speaking. While some details may vary based on the state where the deceased resided, the process generally looks like this:
An executor is named
Once a person is declared legally dead, an executor is named to handle the liquidation of the estate. “Estate” has lots of nuance to it, and many people think that this only pertains to the wealthy who have a lot of assets, but everyone has some type of property that must be taken care of when they die. Whether it’s a laptop, house, jewelry, record collection, 401k, or something else of value, these personal items are considered part of an estate and must therefore be passed on or liquidated.
If the deceased person didn’t name an executor before their death, the courts would typically appoint someone to handle the dissolution of the estate. The executor may be a relative, loved one, attorney, or another third party that will be legally responsible for settling the estate’s affairs.
The estate is cataloged and then dissolved
Once an executor has been named, they’ll be required to go through the estate and list all available assets. If there’s a will, this makes things easier but doesn’t absolve the executor from doing their due diligence to ensure all assets are logged.
After the estate has been thoroughly cataloged, the first thing to be taken care of is any outstanding debts. These are paid off through either any cash left behind or by proceeds from the sale of assets. Once the outstanding debts are settled, the family or other loved ones will receive parts of the estate.
If there’s nothing left after debts are paid, then the family gets nothing. If the estate doesn’t have enough value to pay off the outstanding obligations, the entire estate will be liquidated to pay off what it can, and the balance will then be written off.
What should I do if a debt collector wants me to pay my relative’s debt?
Debt collectors are tasked with getting outstanding debts taken care of and may sometimes try to skirt the law or give false information to settle the debt. This can be due to ignorance, company policy, or just aggressive behavior, but know that unless you’re responsible for the debt due to the reasons listed above, you are not obligated to settle the debt of your deceased relative.
Debt collectors may call you for contact information for the executor or whoever is settling the estate, but they may not discuss the details of the debt or request payment from you. If you decide to make a payment to get them to stop calling, you then take on the legal responsibility of paying off the debt, so don’t make any decisions while on the phone with the debt collector. Contact an attorney if the collector becomes aggressive or demanding. So long as you have no legal ties to the outstanding debt, you’re in no way responsible for paying it off.
The bottom line
Death is a stressful event for family members, and worrying about a loved one’s outstanding debt doesn’t help matters. If you’re wondering whether or not you’ll be responsible for paying off your loved one’s debts, keep this guide handy so that you’ll know what’s required of you and how you can ensure your financial health isn’t affected.
