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Settling Debts of a Deceased Relative

Settling Debts of a Deceased Relative

Losing a loved one is always hard. On top of grieving, you may also have to deal with the debts they left behind. This can be overwhelming. You may get calls from creditors and debt collectors demanding payment. Know that you are not alone in this situation.

When a relative dies with unpaid debts, it can be confusing to figure out who is responsible for paying them. Here is what you need to know about settling debts after the death of a loved one.

You Are Not Personally Responsible for the Debts

The first thing to understand is that you are not required to pay the debts of your deceased relative out of your own money. As a general rule, when someone dies, their debts die with them. The debts do not transfer over to the deceased person’s spouse, children, or other family members.

There are a few exceptions where you could be held responsible:

  • If you co-signed on a loan or credit card
  • If you live in a community property state and are the surviving spouse
  • If you jointly owned a home, car, or other asset

But in most cases, you as a relative are not on the hook for the debt. Debt collectors may try to pressure you to pay, but you are not legally obligated.

The Debts Are Owed by the Estate

Instead of transferring to relatives, a deceased person’s unpaid debts are owed by their estate. An estate is all of the assets and property left behind by the deceased.

The estate’s finances work like this:

  1. Money and assets in the estate first go towards final expenses like funeral costs.
  2. Remaining assets are used to pay any outstanding debt obligations.
  3. Whatever is left over is distributed to heirs through probate.

So if there is enough money in the estate to cover the debts, they will be paid off. If not, the creditors have to write off the remaining balances – they cannot legally pursue relatives for payment.

The Executor Handles the Estate

The executor is the person appointed to manage the estate of the deceased. They identify assets, pay debts and taxes, and distribute inheritances. This role is also sometimes called the administrator or personal representative.

If you are named executor, it is your job to handle communications with creditors and debt collectors. You will need to notify them of the death and make arrangements to pay valid claims from estate assets.

Prioritizing Payments

As executor, you need to understand the order of priority for making payments from the estate:

  1. Final expenses like funeral costs
  2. Federal taxes owed
  3. Medical bills
  4. Secured debts – loans with collateral like houses or cars
  5. Unsecured debts like credit cards and personal loans
  6. Bequests to heirs

Lower priority creditors may not get paid if estate assets are limited. You should consult a probate attorney to ensure debts are settled correctly.

Dealing with Debt Collectors

It’s common for debt collectors to contact relatives of the deceased seeking payment. This can feel intimidating, but remember – you have rights in this situation.

Under the Fair Debt Collection Practices Act, collectors can only discuss a debt:

  • With the deceased person’s spouse
  • Parent of a deceased minor child
  • Executor or administrator of the estate
  • Anyone else authorized to pay with estate assets

If the collector contacts you and you do not fall into those categories, simply inform them that you are not responsible for the debt and cannot discuss it with them. Get their contact information and report them to the Consumer Financial Protection Bureau if they continue to harass you.

Watch Out for Scams

Unfortunately, scammers also use this time to take advantage of grieving relatives. Be wary if someone contacts you claiming your loved one owed a debt but cannot provide documentation or details about the debt.

Never give bank account, Social Security numbers, or other personal information to someone claiming you need to pay a relative’s debt. Always get written validation of the debt first.

Get Help from an Attorney

Settling an estate with debts can get complicated, especially if creditors are aggressive. Speak to a probate attorney – they can help you understand your rights and responsibilities.

If finances are tight, look into legal aid organizations in your area that provide free services for low-income individuals. An attorney can defend you against unlawful collection practices.

Take Your Time

You may feel pressure from bill collectors to pay debts quickly. But you are entitled to due process. Collecting money from an estate can take months or longer.

Don’t let anyone rush you into paying bills or signing anything until you have a chance to meet with a lawyer and consider your options.

Explore Debt Forgiveness

For some types of debt like credit cards and medical bills, you may be able to negotiate with the creditor to reduce or eliminate balances owed. This can help free up more money for heirs.

An attorney can assist you in contacting banks and hospitals to discuss debt forgiveness options. Be persistent and explain the hardship the remaining debt would cause.

Check for Assets

Make sure to thoroughly inventory your loved one’s assets. Look for real estate, investment accounts, insurance policies, collectibles of value, etc. Sometimes people forget about assets that can be used to pay debts.

You may need to hire an appraiser for some items. The extra money could make a big difference in covering more debts.

Don’t Delay the Process

It can be tempting to avoid the hassle of dealing with creditors and debt collectors. But debts typically accrue interest and late fees the longer they go unpaid. And debt collectors may become more aggressive with time.

As difficult as it is, try to start settling debts sooner rather than later. This will minimize interest charges on debts and preserve more of the estate for heirs.

Dealing with the financial affairs of someone who has passed away can be challenging. But take it step-by-step, get help when needed, and know your rights. With time and perseverance, you can properly settle debts and obtain closure.


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