A family member dies. Then the collection calls start. Your loved one died with credit card debt, and now the company wants you to pay. Before you do anything, learn what really happens to unpaid card balance after the cardholder’s death.
Credit Card Debt Doesn’t Automatically Disappear After Death
Dying with credit card debt does not mean the debt is automatically forgiven. Credit card companies do have a right to try to recover the debt.
However, this doesn’t mean that YOU are responsible for paying the debt.
Typically, a person’s estate is responsible for remaining debts, including credit card debts. During the probate process, the executor of the estate takes an inventory of the assets, notifies creditors, pays debts, and then distributes the remaining assets to the beneficiaries.
To notify creditors, the executor sends notice to know creditors, which can include credit card companies. The executor also publishes a notice in the newspaper, and creditors are given four months to make a claim against the estate. This is one reason the probate process takes time.
The claims that are paid by the estate decrease the amount that goes to beneficiaries. For example, if an estate is worth $1 million, but the deceased person had $300,000 in debt, only $700,000 remains to be distributed to the heirs. In some cases, the executor may need to sell assets to pay debts.
This means that if your are an heir, your inheritance may be reduced due to debt, but you won’t typically be required to pay the debt directly or using your own funds. That being said, there are some circumstances in which creditors may have a legitimate reason to go after you for debt.
When Are Survivors Responsible for Debt?
There are two main situations in which a person may be responsible for a loved one’s debt after they die:
- You’re a co-signer or joint account holder. In this scenario, the debt is also yours, so you can be required to pay the debt. Consider this possibility carefully before agreeing to co-sign a loan. Also keep track of joint accounts you have, such as with adult children or former spouses, and consider whether these accounts should be closed in favor of separate accounts.
- You’re the spouse. This one is highly contingent on the specific circumstances. In a community property state, spouses typically share ownership as well as responsibility for debt. Note that Oregon is NOT a community property state, so you may not be responsible for a spouse’s debt. However, Oregon’s Family Expense Law (ORS 108.040) does establish that both spouses with minor children share responsibility for expenses incurred for the benefit of the family.
Watch Out for Scammers and Rogue Collectors
Even if you’re not responsible for a debt, some people might try to convince you to pay it.
- Scammers sometimes check the newspaper for obituaries and probate notices. They then make up fake claims and try to get the grieving family members to pay. Do not assume a claim is legitimate without proof.
- Debt collectors may be very aggressive. Although debt collectors are allowed to try to recover debt, and they should be notified of a debtor’s death, they are not allowed to harass you. The Consumer Financial Protection Bureau says that “a debt collector must not place telephone calls or engage any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.” Calling more than seven times within seven consecutive days, or within seven days after a phone conversation, is considered excessive.
If someone is demanding that you pay a loved one’s debt, the Consumer Financial Protection Bureau advises you to:
- Let debt collectors know that the person has died.
- If you are the executor of the estate, take your time and ask for information about the debt in writing to verify that the claim is legitimate.
- Submit a complaint if a debt collector is causing problems for you.
For more information on your rights, and links to submit a complaint, see the Consumer Financial Protection Bureau.
Talk to a Lawyer
The death of a loved one is a difficult time, and dealing with debt collectors makes it challenging in additional ways. A lawyer can help you navigate the probate process and understand your rights and obligations regarding debt collectors. For assistance, contact Skinner Law.