According to a consumer protection agency known as the Federal Trade Commission (FTC), family members are usually not required to pay the debts of deceased relatives. In fact, the Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from using abusive, unfair, or deceptive practices to try to collect a debt. According to the FDCPA, a debt collector is someone who regularly collects debts owed to others.
When someone passes away, the debt of the person who died does not go away. Instead, the estate of the deceased person covers the debt. If there is not enough money in the estate to cover the debt, the debt goes unpaid. Exceptions to this rule include debt incurred if you: co-signed an obligation; live in a Community Property state (Massachusetts is not a Community Property state); are the deceased person’s spouse and state law requires payment; or were legally responsible for resolving the estate and didn’t comply with certain state probate laws.
It is important to note that even when you’re not legally responsible to pay the debts of a deceased relative, a creditor may take what a relative intended to leave for you. For example, unless you are listed as a beneficiary of a 401(k) or an IRA, your money can be taken by creditors for unpaid debts.
Other important bits of information regarding debt after a relative passes away: You are not responsible for your deceased relative’s credit card debt unless you are a cosigner. A state may recover Medicaid payments from age 55 to the relative’s death, but a state may not ask you to foot the bill or pursue payments of your surviving spouse. If you inherit a home with a mortgage on it, the lender may not demand that you pay off the mortgage immediately.
Generally, the person named in the will who is responsible for settling a deceased person’s affairs is known as an executor. If there is no will, the court may appoint an administrator, personal representative, or universal successor, and allow the person to settle the affairs.
Under the FDCPA, a collector may contact and discuss a deceased person’s debts with that person’s spouse, parent(s) (if the deceased is a minor child), guardian, executor, or administrator. The FDCPA permits collectors to contact any other person authorized to pay debts with assets from the deceased person’s estate. Debt collectors may not discuss debts of deceased persons with anyone else.
If a debt collector contacts a deceased person’s relative, the collector may only contact a third party to learn the name, address, and telephone number of the person authorized to pay the deceased’s debts. One exception to this general rule is that a collector may call again if the collector reasonably believes that the information provided initially was inaccurate or incomplete, and that the third party now has more accurate or complete information. This being stated, a collector cannot say anything about the debt to the third party.
When faced with the loss of a family member, don’t handle these affairs alone. Be sure to consult with skilled counsel.