Debt After Death: 9 Things You Need to Know

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DISCLAIMER. The information provided in this article does not, and is not intended to be, legal, financial or credit advice; instead, it is for general informational purposes only. 

Losing a loved one is hard on so many levels. Funeral arrangements and estate matters have to be dealt with in the midst of grief—and questions abound. What debts are forgiven at death, for instance? Can your family members’ creditors come after you now?

Technically, personal debts aren’t forgiven at death. Instead, they pass to the estate of the deceased person. We’ll explore what that means in practice in this post—and we’ll answer a few other questions along the way. The laws and rules can vary greatly from state to state, it is important to consult an attorney to help you navigate the process of how to handle the debts of a loved one after they have passed.

What Happens to Debt When You Die?

Personal debts created by the borrower themselves with no cosigning parties usually pass straight to the estate—unless the decedent was married and lived in a community property state. (We’ll cover what happens to debt in community property states a little later.)

Jointly held debts are a little different. Several different types of joint debt pass straight to cosigners without going through probate. Let’s take a closer look at five different types of debt to see what might occur after the primary borrower passes away.

Mortgage Debt

Joint mortgages pass directly to co-borrowers, who become responsible for the loan. Mortgages held by one borrower—i.e., the decedent—pass to listed beneficiaries, who then become responsible for the loan. If beneficiaries can’t or won’t assume the loan, they can sell the property to settle the debt instead.

If your loved one doesn’t have any beneficiaries listed on their will when they die, their mortgaged property may go into foreclosure. At that point, their bank will sell the property to recover the mortgage debt.

Car Loan Debt

Car loans held in joint names generally pass straight to the other borrower. If there is no cosigner and the estate is able to pay off the existing car loan, it will do so and then pass the car to the listed heir. If the estate cannot pay off the loan, the person who inherits the car can sell it to cover the debt. If you qualify for a car loan or you can pay their loan off in full, on the other hand, you can keep the vehicle. If no one is able to pay off the loan, the lender may repossess it.

Credit Card Debt 

Joint credit card debt passes straight to the other borrower. Credit cards with authorized users on them are different, however—unlike cosigners, authorized users aren’t responsible for debts. 

If your family member passes away with outstanding credit card debt, the lender may try to recover the debt from their estate. If there isn’t enough money left in the estate to cover those revolving debts, they’re usually simply written off. 

Student Loan Debt

Federal student loans and PLUS loans get discharged if borrowers pass away. Private student loans behave much like any other type of personal loan—if cosigners are involved, they’ll be liable for the debt. If there are no cosigners, student loan debt must be paid by the decedent’s estate—sometimes immediately.

Medical Debt

Medical debt can be more difficult to understand than other types of debt. If your family member died with medical debt, you may want to speak with a lawyer to understand what you are responsible for. For example, under a legal rule called the Doctrine of Necessities, in some areas, you may be responsible for your spouse’s medical debts if they are considered “necessary” expenses. This is true even if the bills are only in your spouse’s name and you did not sign for them.  Another exception would be in the case of a child—the child’s parents would remain responsible for the medical debt.

Many small medical debts are discharged when patients die. Larger medical debts, like other substantial debts, may become the responsibility of the deceased person’s estate.

9 Things to Know About Debt After Death

Assuming an estate is available to pay your loved one’s debts, here are ten things to know about debt after death.


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1. The Executor of the Estate Deals with the Debt

After your loved one passes away, direct any debt-related correspondence to the executor of their estate. As soon as the person dies, their estate is born—and along with it, an estate executor. Some people name executors before they pass away, but in other circumstances, executors are appointed by the courts.

Executors handle all financial issues relating to the deceased person’s estate, including debt payments. If you receive any unexpected mail from your loved one’s creditors, let the executor know right away.

2. Notify Creditors and Credit Bureaus

Creditors and credit bureaus need to know about your loved one’s death as soon as possible. This is another job for the executor of the estate. Here’s what the executor needs to do:

  • Notify all three credit bureaus—Equifax, Experian, and TransUnion—about the death, and ask that they place a “Deceased: Do not issue credit” notice on the person’s file to prevent identity theft.
  • Obtain a copy of the deceased person’s credit report to see what type of obligations they had.
  • Contact all the deceased person’s creditors to let them know that the individual has died.
  • Contact the Social Security Administration to make sure they note the person’s death.
  • Send copies of the deceased person’s death certificate to all three credit bureaus at the following addresses via certified mail:

TransUnion
P.O. Box 2000
Chester, PA 19022
800-916-8800

Experian
P.O. Box 2002
Allen, TX 75013
888-397-3742

Equifax
P.O. Box 740260
Atlanta, GA 30374
800-685-1111

3. Find Out Who’s Responsible

Before proceeding any further, make sure cosigners and joint borrowers are aware of your loved one’s death. Remember—responsibility for mortgages, credit cards, student loans, and other joint debts automatically pass to the surviving account holder. Joint responsibility doesn’t apply to additional cardholders or authorized users.

4. Stop Using Credit Accounts

Additional cardholders and authorized users must not charge anything new to the decedent’s accounts. Continuing to use cards associated with the deceased person after being informed of the person’s death could be considered fraud. At this stage, authorized users should apply for their own cards.

5. Keep the Estate Intact

Don’t distribute valuable possessions like jewelry and antiques yet. Settle debts first, and share any remaining physical assets afterwards. If you do distribute assets before sorting out debts, beneficiaries may end up being liable for those debts by proxy.

6. Negotiate with Creditors

If you’re a surviving partner and you’re having trouble paying joint debts after your spouse’s death, speak to your creditors. Many lenders are sympathetic and will work with you to ensure your credit stays intact. Explain your situation and tell them about any outstanding financial obligations and about any incoming life insurance money. 

7. Be Aware of Community Property States

In most states, surviving partners are not liable for their spouses’ personal debts. In community property states—Alaska (optional), Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin—however, they are. Surviving spouses in these states are responsible for their deceased partners’ debts, including any debts they didn’t know about. 

The community property stipulation only extends to debt accrued during the marriage. Debts accrued before the marriage are not community property debts. If you live in a community property state and need advice, contact a reputable probate attorney.

8. What Happens If There’s No Estate?

So, what happens to your debt if you die with no estate—or if your estate isn’t large enough to pay for it all? In short, the debt is written off. Without an estate to pay for it, it’s considered unrecoverable and is forgiven. 

9. If in Doubt, Contact an Attorney

We strive to provide information that’s accurate, but we’re not lawyers. If you’re confused and need advice, don’t hesitate to get in touch with a well-regarded consumer law or probate attorney. They’re not always cheap, but the service they provide can be priceless.

Preparing for Debts after Death

There are a couple of things you can do to make sure your outstanding debts are repaid quickly and efficiently after you pass away. First, create a clear legal will and name an executor. Then, consider bundling numerous small debts into one consolidation loan. Finally, think about buying a life insurance policy to cover any outstanding debts. All of these things can help make life easier for loved ones.

If you’re not sure how much you owe, sign up for ExtraCredit from Credit.com. The credit snapshot you receive can help you add up your financial obligations well before they become a burden.

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What Happens If I Never Pay an Old Debt?

never pay a debt

Maybe you can’t pay. Or maybe you won’t pay. Either way, you have an old debt hanging out there. What if you just decide to let it go and do nothing about it? That’s what Credit.com reader Dave, who says he can’t afford to pay off the old debts he owes, asks:

My credit card debt is roughly $12,000. I consulted a bankruptcy attorney. He said filing bankruptcy should not be my first option since the amount is quite low. And the collectors have stopped calling. In California, is there a 3 or 4 years of limit by which the collection agency can file lawsuit? After that time, they can’t sue? Then what happens? Can they still collect but not sue? Debt still stays on credit files. If they can’t sue me since it’s about 4 years since [it] went into collection and the attorney said filing may not be good idea for such small amount, then what?

Dave’s question is hardly unusual. Plenty of people wonder what will happen if they simply do nothing about an old debt.

“There is no law saying that they cannot try to collect after the statute of limitations has expired,” says Southern California consumer law attorney Robert Brennan. At least not in California, where he practices, and in most states it’s the same — though if you’re considering this move, you’ll want to consult an attorney who knows your state’s rules. “In California, on written contracts, the statute is four years from the date of breach which, in most cases, will probably be the same as date of first delinquency.”

He goes on to explain that “under the Fair Debt Collection Practices Act, debt collectors may not make false representations in connection with collecting debts, and may not take or threaten to take legal action that cannot be taken. So, if a debt collector threatens to sue the consumer past the statute of limitations, this may well be a FDCPA violation, and I would argue that it is. If a debt collector tells a consumer that it can sue the consumer five years past the date of first delinquency, this is a false representation made in connection with debt collecting, and is also actionable under FDCPA.”

In other words, if a debt collector threatens to take you to court after the statute of limitations has expired, you can actually sue them, in which case, they may end up owing you money.

Does any of this mean Dave won’t hear anything more about these debts? Probably not. “If a collector makes routine debt collection phone calls and does not otherwise violate the  FDCPA or mislead the consumer, the debt collector may continue to attempt to collect the debt,” says Brennan. Nevertheless, consumers always have the right to tell a debt collector not to contact them, and if the debt collector continues to call, they again may be in violation of the FDCPA.

The statute of limitations varies from state to state, and may be different for various types of consumer debts. In many states, they often range from four to six years, calculated from the last payment on the debt.

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Collections & Your Credit

As far as Dave’s credit reports are concerned, these debts can’t be reported forever. Collection accounts may be reported for seven years plus 180 days from the original date of delinquency — the date he first fell behind with the original creditor. So if he missed a payment to his credit card company on Jan. 1, 2000, and it was later sent to collections, Jan. 1, 2000, is the original date of delinquency.

After that 7 1/2-year time period elapses all collection accounts related to that particular debt can no longer be reported, regardless of whether they are paid or not. There is the risk, however, that one of the current collectors sells the account to another collection agency and that creates a new collection account.

Starting Over

In addition to wondering about his old debt, Dave wonders what to do about his credit going forward:

Would you suggest I apply of secure card (can I?) even though I’ve debts in collection? And would a NEW secure card improve my FICO even though my old debts are showing up in my files?

A secured card, which requires the cardholder to place a security deposit with the issuer, is often an excellent option for rebuilding credit, and the applicant generally need not have good credit to get one of these cards since the line of credit is fully backed up by the deposit, at least initially. (We explain secured credit cards in greater detail here.)

When it comes to rebuilding credit, it’s usually best to start as soon as possible. It takes time to build positive credit references. One of the factors used to calculate credit scores is the age of accounts.

At the same time, however, Dave should also be thinking about ways to shore up his finances so he’ll have adequate emergency savings in case he runs into difficult times in the future. He can review his credit reports for free once a year and monitor his credit scores for free on sites like Credit.com (updates are available every 14 days), where he will also get an action plan for improving his credit over time. As these unpaid accounts become older and his new account is paid on time, he should see his credit scores continue to get stronger.

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This article was updated on March 1, 2017.

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How Does Credit Counseling Work and Is It Right for You?

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Debt can get complicated, especially if you have a lot of it. Credit counselors are trained professionals who help individuals and families work to get a handle on their debt so they can lay a stronger financial foundation for the future. How does credit counseling work? Find out more below so you can make a decision about whether this is a tool you want to use.

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In This Piece

  • What is credit counseling?
  • How does credit counseling work?
  • How much does credit counseling cost?
  • The pros of credit counseling
  • The cons of credit counseling
  • Does credit counseling hurt your credit?
  • Who is credit counseling right for?
  • Alternatives to credit counseling

What Is Credit Counseling?

Credit counseling is often promoted as the best option for consumers who are having trouble managing debt. In fact, the Credit CARD Act requires credit card issuers to publish, on card statements, a toll-free number for consumers to get credit counseling help.

Credit counseling is exactly what it sounds like: A trained and experienced financial counselor works with you to understand your debts and assets. They then help you work out a plan to deal with your debts or offer advice about what other options might be available to you.

This isn’t a magic potion that dissolves your debt or improves your credit, though. Credit counseling requires you to be an active participant in the process. The counselor might help you create a budget, for example, but then you have to be willing to tighten your belt and follow the budget to make it work.

It’s also important to do your research to make sure you are working with a legitimate, certified credit counselor. Credit counseling is unlikely to help you if your credit counselor isn’t trained.

How Does Credit Counseling Work?

The exact process can differ somewhat depending on what organization provides the credit counseling and what your situation is. Here’s a look at some common steps that you might be a part of when you seek credit counseling:

  • You schedule an appointment with the credit counselor. This may occur in person or via video conference or phone depending on your preferences and the policies of the organization. 

>> Learn how to choose a credit counselor

  • The credit counselor reviews your situation. Be prepared for this fact-finding meeting by gathering information beforehand. Copies of check stubs showing your income, a list of all your monthly expenses, and copies of all your bills for at least a month may be necessary. The credit counselor will want to know the balance on all your debt accounts as well as the interest rate you’re paying.
  • The credit counseling firm checks your credit. They run a soft credit check, so it won’t hurt your credit. This is to help ensure that all outstanding items are being looked at and help the counselor understand if you’re dealing with collections.
  • The credit counselor helps you create a plan. This might include options such as budgeting, debt settlement, consolidation loans, or debt management programs.
  • Once you agree to a plan, it’s often up to you to put it into action. Depending on what the recommendation was, you might work with other professionals to make that happen. 

How Much Does Credit Counseling Cost?

If you go through a nonprofit credit counseling service, the counseling itself is usually free. Even for-profit debt management companies often provide a free consultation to help you understand what your options are. If you work with your credit counselor to set up a debt management plan (DMP), you will make a monthly payment to your credit counselor who will pay your creditors on your behalf. These plans may come with a small fee as well.

Working with a debt settlement company is different and typically does come with some fees, though. A debt settlement company helps you negotiate payment arrangements with creditors that are satisfactory for both you and the companies you owe.

The Pros of Credit Counseling

  • You work with experienced professionals. Professional credit counselors are well-versed in personal financial management and may know about and understand options you don’t. This could help you find the best solution for you.
  • You get third-party eyes on your situation. Sometimes, you’re so caught up in the problem and the emotions and stress of it, it’s hard to make the most logical choices. Credit counselors aren’t caught up in your stress and can help you see the big picture and move forward logically.
  • You can get advice for free. If you work with an organization that provides free credit counseling or a free initial consult, you can get some peace of mind knowing what your options are without having to pay for it.

The Cons of Credit Counseling

  • Credit counseling isn’t a magic solution. If you don’t have enough money to cover your debts or you’re going to have to tighten the belt a good bit to do so, credit counseling doesn’t change that. You may still have a lot of work to do going forward.
  • You may have to pay for services. Not all credit counseling is free, and this can add to your debt expenses. In some cases, the fees might be high enough that they make it harder to pay off your debt. Make sure you read the fine print and understand exactly what you’re paying for and how much.
  • You have to watch out for scams. Choose a good credit counselor by reading reviews and working with organizations that are established. Consider looking for a credit counseling partner that’s accredited by a national organization such as the National Foundation for Credit Counseling. If you enter into a debt management agreement, you may want to track your credit to ensure payments are being made in a timely manner.

Does Credit Counseling Hurt Your Credit?

Whether or not you sought credit counseling isn’t something that shows up on your credit report. So the act of credit counseling itself does not hurt your credit history or score.

However, some of the actions that are recommended by credit counselors might temporarily hurt your score. Settling debt, closing accounts, or adding new loans or balance transfer accounts that help you consolidate existing debt can all impact your credit score. In some cases, it might be that you’re taking a short-term hit to your score to help improve your financial standing in the long run— but this is always something to consider carefully.

Who Is Credit Counseling Right for?

Whether or not credit counseling is right for you is a personal decision. However, the best candidates for this option tend to be people with a lot of revolving or unsecured debt who do have the income to be able to cover their debts. They just need help creating a plan and getting finances in order to be able to do so.

Alternatives to Credit Counseling

Credit counseling isn’t the only way to get a handle on your debt. Here are some other options to consider.

  • Debt settlement. This occurs when you negotiate with a creditor to pay a lower amount than you actually owe. The creditor considers the debt paid off, but it shows up as “settled” on your credit report.
  • Balance transfers. You may be able to transfer high-interest credit card debt to a card with lower interest or even a 0% balance transfer This could help you pay your debt off faster.

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  • Consolidation loans. A consolidation loan occurs when you take out one loan and use the funds to pay off existing debt. Then, you only have to deal with making one payment, which might help you manage the debt better.
  • Bankruptcy is a last-resort option that may be necessary if you simply don’t have the income to pay all your obligations.
  • Credit repair. If what you really need help with is removing inaccuracies from your credit report, you might consider signing up for credit repair services. 

Does credit counseling work? It depends on your situation and how willing you are to stick with what the credit counselor recommends. You also need to be sure you’re working with a reputable organization. Consider signing up for the Credit Report Card to keep an eye on your credit as you go through any type of debt management process. 

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Can Debt Collectors Call on Holidays?

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When you’re in debt, getting calls from debt collectors is common. But can debt collectors call on holidays? Although there are no regulations that specifically make calling on holidays illegal, there are regulations that prohibit debt collectors from contacting consumers at unusual or known inconvenient times. 

Find out more about the answer to this common question, and learn what you can do to take care of your debt for good. 

Can Debt Collectors Call on Holidays?

You probably don’t want a debt collector to call when you’re at home, spending a holiday with friends and family. The good news is there are protections in place to eliminate abusive and unfair debt collection practices.

The Fair Debt Collection Practices Act (FDCPA) notes that a debt collector may not communicate with a consumer “at any unusual time or place or a time or place known or which should be known to be inconvenient to the consumer.” With this regulation in mind, early mornings and late nights are not acceptable times of day for debt collectors to call.

Can creditors call on holidays? Because many holidays are public knowledge, you can generally expect that debt collectors won’t call at these times. With that being said, it’s important to note that not all localities, states or countries acknowledge the same holidays. 

Can bill collectors call on holidays? Technically, yes. But you can ask them to stop. 

Can a Debt Collector Contact You at Any Time?

No, they cannot. They can contact you, but they need to follow the regulations outlined in the FDCPA. If bill collectors are calling at unreasonable times of the day or continually call you, it may be considered harassment. It’s recommended that you document every date and time that a creditor calls so you have a record to use in case you seek legal counsel to deal with creditor harassment.

Can You Tell a Debt Collector to Stop Calling?

Yes, you can. If you don’t want a debt collector to call on holidays or you’re getting calls at unreasonable hours, you can send a letter requesting that they stop. Creditors must cease contacting you by phone once you make the request, but that doesn’t mean you don’t still owe the debt. They can continue to take other actions to collect it.

What Happens if You Ignore Debt Collectors?

You might be thinking of ignoring calls from debt collectors but worry about the consequences. When you ignore these calls, in some cases, nothing will happen. The creditor might stop reaching out.

But that’s not always the case. You might face negative consequences for ignoring these calls. 

If the debt is yours and you continue to ignore debt collections, you might face wage garnishment or a lawsuit. Your credit score and credit report can also take a hit. Though you shouldn’t have to take calls at unreasonable times or on holidays, if you owe a debt, you may want to work with the collection company and consider how you can pay it to avoid other negative consequences. 

How Can I Keep Debt Collectors From Interfering With Holidays?

If you’re getting calls from bill collectors and are worried about the possibility of them calling on holidays, you might be wondering what steps you can take. Here are some suggestions. 

Ask Them to Stop 

Consumers have rights, which are outlined by the FDCPA. One of them is that a debt collector must stop contacting you after you send a letter requesting them to do so. You’ll still be responsible for any debt you owe, but they must follow your request and stop reaching out. 

This needs to be done in writing, not by phone. Consider keeping a copy of the letter that you send for your records. You may also want to send the letter by certified mail so you know when the debt collector received it. 

Work Out a Payment Plan

If you want to lessen your financial stress and don’t want the collector to take further action, consider negotiating a repayment plan with your creditor. If you do this, make sure everything is outlined in writing. 

If the debt hasn’t gone to collections yet, the creditor may be willing to work with you. In some cases, creditors might waive fees, lower the total amount due or lower the interest rate if it means they can collect some of the debt from you. 

Consult an Attorney 

If a debt collector continues to call after you requested they stop or if you don’t owe the debt, consider contacting an attorney. One can advise you of your rights and any next steps you might want to take. 

Help Is Available 

No one wants to be harassed by creditors, and they shouldn’t be. Remember that regulations that are in place to protect consumers like you. Don’t be afraid to reach out to collectors to ask them to stop calling if it’s interfering with your happiness or day-to-day affairs. 

If you have unpaid debt and want to improve your credit situation, ExtraCredit can give you the tools to help you make positive changes. The service lets you track your credit score. It also offers a discount on credit repair services from one of the leaders in credit repair if that’s something you decide to pursue.

Sign up for ExtraCredit today!

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