Debt After Death

Some of the most frequently asked questions in the estate planning field are about debt and what happens to it after you die.

The important thing to remember is that in most cases, family members are not responsible for the debt of a dead relative. The debt however, does not just disappear.

One of the primary duties of an estate’s executor (“Personal Representative or ‘PR’”) is the settling of legitimate debts.

One of the first thing a PR must do when opening an estate is putting the known creditors on notice in writing that they may be owed a debt, and if so that there is a set time frame to file an appropriate ‘Claim” against the estate.

The executor is also required to publish a notice of death in a local legal newspaper which serves as notice to any unknown creditors and starts the time running, they have in which to file a claim. Creditors that miss the deadline to file a valid claim are barred from being paid by an estate.

A claim is not considered filed until it is received at the Register of Wills.

When you leave behind an asset that has debt attached to it, the debt stays on the property.

Your heirs can either continue to pay the debt or sell the property to pay off the debt. If you believe this would cause a burden for your heirs, you can leave them assets in your will specifically designated to pay off the debt.

You heirs will not have to pay unsecured debt, but the executor of your estate will have to pay the debt using estate assets so long as a claim is filed in a timely manner.

As many who have dealt with them in the past can attest, debt collectors often walk a very fine line between what is legal and what is not when pursuing a debt.

There are several governmental bodies that have placed restrictions on certain debt collection practices, especially concerning a deceased person.

Under the Fair Debt Collection Practices Act (FDCPA) collectors can only discuss the decedent’s debt with that person’s partner, guardian, executor, or parent(s) if the deceased was a minor. They may also contact persons authorized to pay debts with assets from the decedent’s estate.

Outside of these parties collectors are usually only authorized to contact third parties a single time to get contact information of those listed above.

Dealing with the loss of a loved one is hard enough without having to worry about being personally liable for any debts they may have left.

To avoid potential problems it is always a good idea to go over the estate plans of you and your loved ones with a qualified attorney.

Planning ahead is a gift to your loved ones!