It may seem callous to family members that creditors seem to descend like buzzards after the death of a loved one but it may be the last chance the lender has to claim a portion of the estate to pay debt owed.
When someone dies, an Executor is appointed by the court to distribute the goods and money of the person to the family members designated in the will of the deceased. If there is no legal will, the Executor will disperse the estate according to the laws of that state.
Part of the duties of an Executor of an estate is to make certain personal items are distributed to loved ones as dictated by the Last Will and Testament and then to convert the remainder of the estate into cash to be divided according to the will.
From this cash portion of the estate, the Executor will pay outstanding bills and debts to the limit of the funds available. If the decease was financial sound at the time of death the process will be completed, all bills and debts paid and any funds remaining will be disbursed to beneficiaries.
When the person who dies has few assets it is a different story. Credit card companies want to be paid and will often call the Executor or even remaining family members in an effort to collect the debt owed by the deceased.
The best free legal advice is to learn the laws in the state where the deceased resided. The person handling the debt settlement of the estate should create a form to use when taking info from creditors of the deceased.
List the questions to be asked and a space where the answer given can be added. This form will help organize the debts and help prioritize them when the estate is not able to settle accounts in full.
Reasonable questions to ask might include:
- Name of the original creditor.
- Name of person who is calling about debt collection.
- What is the company’s name, phone number and mailing address.
- When was the debt acquired.
- For credit cards – when was account opened and when was it closed.
- What is the exact name on the account.
- Are there any authorized users on the credit card.
- Is there a co-signer on the account.
- What is the total dollar amount owed.
In addition to the questions above, you might ask why the creditor has chosen to contact you. If you are not the Executor you might simply refer the creditor to the phone number of the executor without asking any information.
If you are responsible for paying the debts of the estate, ask if the caller can provide proof the debt exists and ask the person to send that proof to you or to the Executor or attorney in charge of settling the estate.
Before agreeing to pay off any debt, you will need to ascertain whether the debt is currently owed. You may need legal advice as the amount due may have been paid or dismissed by bankruptcy in the past. In addition, some debt may have exceeded the statute of limitations for the state.
The statute of limitations limits how long a credit card company has to attempt to collect a debt from any person, living or deceased.
New credit laws mandate quick resolution of credit card debt of a deceased person. When an estate administrator requests information about a credit card debt, the lender has thirty days to respond to the request for a final balance.
If the debt is paid within 30 days, the lender may not charge interest for that period of time. In addition, no annual fees or late fees can be added to the account balance of a deceased credit card user.
If the credit card account is in the name of the deceased person only, the debt may be paid from the settling of the estate. Credit card lenders must respond quickly to requests for payoff amounts from the lawyer or executor of the estate and must provide documentation when requested.
If the estate is small and the amount left is not enough to satisfy the debts of the deceased in full, card lenders may be at a loss.
Credit card debt is the last debt in line to be paid by an estate and once the money in the estate is depleted, any debt left will not be paid.
Finding legal advice for debt of deceased family member may be necessary in order to distribute the estate funds according the laws of the state of residence.