What Happens to Collection Debts When Someone Dies?

Dealing with a family member or loved one’s death is challenging enough, and the added burden of handling their collection debts can make the situation even more overwhelming. If you find yourself in this difficult position, it’s important to be aware of your rights, legal responsibilities, and the steps you can take to address the situation.

When the unimaginable or the unbearable happens, and you lose a spouse, partner, parent, child, or sibling, the last thing you want to deal with is collection agencies calling you to ask you to pay for your loved one’s debts. Regrettably, many people experience exactly this and aren’t sure what their legal responsibilities are or what their consumer rights entail. In such circumstances, knowledge is power, and understanding the debt collection process can help you navigate this difficult time with more confidence and control.

What do collection agencies do with debt when the debtor dies?

If the deceased was married and living in one of the nine community property states, any debts in collections that they incurred during the marriage will become the responsibility of the surviving spouse. In these cases, the spouse is legally obligated to pay off the debt, which can add significant financial strain during an already challenging time. It’s crucial for family members to be aware of their state’s laws and how they may impact their financial responsibilities after a loved one’s death.

In situations where the deceased lived in a non-community property state or did not have a surviving spouse, the collection agency will generally file a claim against the deceased’s estate. The estate will be responsible for paying off the debt through available assets, such as property, cash, or other investments. This process can be lengthy and complicated, and it’s essential for family members and executors to be informed about their rights and responsibilities during this time.

Who Can Be Contacted by a Debt Collector?

Even though family members may not become legally responsible for a parent’s, spouse’s, sibling’s, or child’s debt upon their death, collection agencies may still contact family members after learning of the debtor’s death in an attempt to settle the debt.

If the collection agency keeps their conversations specifically to requesting updated contact information for the deceased debtor or the estate, the agency may typically reach out to any adult family member or friend one time. They may not discuss the deceased’s debt in any detail. During these phone calls, according to the FTC, the debt collector is not permitted to request payment from a family member or friend, as it would be a violation of the Fair Debt Collection Practices Act (FDCPA).

Debt collectors may reach out to the deceased’s surviving spouse, estate executor or administrator, or even a parent or guardian if the deceased was a minor. If the person had authorized the collection agency to speak with anyone else about their account, the debt collector may also reach out to that person or those people to discuss the details of the debt. It is essential for family members to be aware of their rights during these interactions and to know when a debt collector may be crossing the line.

Who, If Anyone, Is Still Responsible to Pay for the Collection?

The number of individuals who are legally responsible for paying the collection account of a deceased family member is quite limited. If before going to collections, the original account had a co-signer or joint owner on the account, the surviving account co-owner will become fully responsible for repaying the entire balance. This can be a significant financial burden, so it is crucial for co-signers to understand their potential obligations.

In the few community property states, a surviving spouse will have to pay their deceased spouse’s collection accounts, but only if the debts were incurred during their marriage. If the deceased had taken out loans or incurred credit card debt before the marriage, the surviving spouse is not typically responsible for those debts. This distinction can provide some relief for surviving spouses, but it’s essential to know the specifics of your state’s laws.

Otherwise, the collection agency will only have recourse to payment through the deceased’s estate. They may ask a family member such as a parent, sibling, or child to repay the debt, but that family member usually has no legal obligation to do so. In these cases, understanding your rights and the limits of a collection agency’s power can help protect you from undue financial stress.

Signs of Illegal Debt Collection Practices

Unfortunately, what a collector agency is permitted to do and what some unscrupulous debt collectors actually do in practice do not always coincide with each other. The Fair Debt Collection Practices Act (FDCPA) can provide very specific protections for consumers and, in this case, the surviving family members. However, a few debt collectors try to put profits before principles over the short term, but they typically will get into trouble with government regulators or face legal consequences.

If you lose a family member who had a collection account, watch for these signs of law violations regarding the collection of their debt. Being aware of these illegal practices can help protect you from undue stress and harassment:

1. The debt collector calls non-family members and discusses the debts with them.
2. The debt collector discusses the account details with siblings, children, or parents who are not the estate executor or administrator.
3. The debt collector tells family members, other than the surviving spouse in a few community property states, they are required to pay the debt of their deceased family member.
4. The debt collector contacts you more than a year after the passing of your family member to request payment of the debt incurred by the deceased.
5. The debt collector tells you they cannot confirm the debt (a “validation letter”) by mail.
6. The debt collector threatens to send the sheriff or a US marshal to arrest you if you don’t pay immediately.
7. The debt collector threatens to show up at your place of employment to collect payment for your deceased loved one’s debt.
8. The debt collector repeatedly threatens to sue you and garnish your wages, even when it becomes clear they have no intention to do so.
9. The debt collector calls you before 8:00 am or after 9:00 pm without your permission.
10. The debt collector continues to call you at work even after you’ve told them you are not permitted to receive personal calls at work.
11. The debt collector claims to work for a government agency, including law enforcement.
12. The debt collector claims to work for a consumer reporting agency (“credit bureau”).
13. The debt collector sends you a postcard (mail not inside an envelope) indicating you owe a debt.
14. The debt collector cannot tell you who the original creditor was (e.g. Dr. ABC or credit card company XYZ).
15. The debt collector threatens you with physical harm.
16. The debt collector uses profanity or offensive language during your conversation.
17. The debt collector calls you multiple times a day and repeatedly for days or weeks.
18. The debt collector posts publicly on social media about you and the debt.
19. The debt collector continues to contact you after you have provided them with a written notice requesting they stop communicating with you.

What Debt Collectors Do If They Can’t Get Paid?

Debt collectors have a limited number of options to pursue if the debtor passes away. First, as noted previously, they can attempt to secure payment from a family member legally responsible for the debt, such as a surviving spouse.

They will also attempt to collect the debt from any co-signer or joint account owner listed on the debt. These might be immediate or extended family members, friends, or business associates, among the most common.

If the collection agency feels you legally owe the debt and you refuse to pay it, they may consider suing you in court rather than through the estate. If you receive a summons from the court indicating a creditor (e.g. collection agency) has sued you, do not ignore it. If you do not attend the hearing, you will lose by default judgment, after which the collection agency may proceed to garnish your wages or use similarly aggressive means to recoup the debt.

If the deceased left no legally responsible persons to pay their debts, the collection agency may attempt to file a claim against the deceased’s estate.

If the estate has insufficient assets (property, cash, securities, etc.) to pay the debt collector, the collection agency will likely write off the account as uncollectible. This means they will no longer actively pursue the debt and might even remove it from their records.

However, some debt collectors might still try to resell the account to yet another collection agency. You don’t have to spend much time searching online to find stories of family members who begin receiving collection calls 5, 10, or even 15 years after the death of their family member. In most cases, the state’s statute of limitations has run out, and the agency has no legal recourse to collect the debt.

In such situations, it is crucial for the family members to be aware of their rights and not to cave into pressure from debt collectors who may be engaging in illegal tactics. Remember, you have the right to request debt validation, dispute inaccurate information, and report abusive collection practices to the Consumer Financial Protection Bureau (CFPB) or your state attorney general’s office. By staying informed and asserting your rights, you can protect yourself and your loved ones from undue stress and financial hardship during an already challenging time.

Related Questions

How long after someone dies can creditors try to collect a debt?  Creditors may have anywhere from three months to a year from the death of a debtor to try to collect on their debts. This amount of time will vary depending upon the estate laws of the state where the person last lived.

What happens to your debt if you die with no estate?  Unless your debts had no co-signers or you lived in one of the nine common property states where a surviving spouse might become responsible for your debts, lenders and creditors will have to write off your debts as unrecoverable if you pass away with a completely insolvent estate (no money to pay creditors).