Do you HAVE to Pay the Debts of a Deceased Family Member?

Often when a person dies, he or she owes money.  Even if the person did not use credit cards, s/he may be responsible for a mortgage, car payment, or even medical bills from his/her last illness.

Obviously, if a mortgage or car payment is ignored after a person’s death, the property can be foreclosed on or repossessed.  But what about the other debts?

Creditors may begin contacting the deceased person’s relatives (especially if s/he had a spouse). Some are polite and honest, but other creditors are not, and often creditors are impatient.  It can be especially difficult for a grieving spouse, domestic partner, or child to know what to do and what s/he is responsible for paying, if anything.

Contrary to some popular belief, debts do not just “disappear” when a person dies.   Creditors will watch the newspapers and court notices to see if a probate action has been filed. The creditor is then able to file paperwork in the case and attempt to collect the debt from the estate.  Consequently, you might think that it is better not to file for probate at all.  This is not necessarily true. You may need to file a probate action for other reasons (to distribute and transfer real estate and bank accounts, for instance). 

Some creditors will get very aggressive and will intentionally mislead the surviving family member.   It is safe to assume that some collection agents have gotten more aggressive as they are “hungry” in this economy.  Abuses may occur, especially when the surviving family member is an elderly widow or widower.   The collection agent may encourage the survivor to “protect your husband or wife’s good name” (even if the surviving spouse is not legally required to pay the debt and to do so would work a great hardship.)

Having said that, there are some instances in which a survivor may be obligated to pay the debt of a deceased person.   For instance, if the two people both signed a contract together, or if the survivor had co-signed or guaranteed the debt of the deceased.  However, being an “authorized user” is different than being a “co-debtor”. For instance, when pertaining to credit cards, an “authorized user” is someone who has permission to use a credit card, but is not necessarily responsible for the debt. A “co-debtor” is responsible jointly for all debt that is incurred.

In some situations, a spouse may be responsible for paying a debt of a deceased spouse because of community property laws.  But whether something is a “community debt” can be a tricky question. 

In addition, there are a few other situations in which a survivor may have to pay the debts of a deceased person, and some other situations in which they are not responsible.   Many situations have to be decided on a case-by-case basis, with a good look at all the facts and the documentation that pertains to the estate.

If you are responsible for an estate (or choose to take on that responsibility), be aware that you must understand and comply with the appropriate laws.   If you distribute funds improperly you can be held legally responsible.

The Federal Trade Commission has an excellent guide about this subject on the FTC website.http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt004.shtm

Bottom line:  Don’t be pressured into making a decision when you do not have all the information you need. If you are grieving the death of a loved one you may need time to heal before you tackle non-emergency financial issues.  It is worth the time and money to have a consult with a Texas probate attorney to determine what options you have before you act.

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