Who Is Responsible for a Deceased Relative's Debt?

These laws protect borrowers while alive and relatives after a loved one dies. This article provides answers to some frequently asked questions regarding handling a deceased person's debts.

Who Is Responsible for Paying the Debt?

Most debt does not simply disappear once the debt holder dies. Generally, a deceased person's estate is responsible for paying their debts. Once someone dies, they are called a "decedent." Their "personal representative" distributes the decedent's assets according to the terms of a will or, if the decedent had no will, state "intestacy" laws. The personal representative may be appointed in a will or, if there is no will, by a court.

The personal representative pays off debts before distributing any remaining property to heirs (people who inherit based on descent) and beneficiaries (people who are handpicked in a will for inheritance). If there isn't enough money in the estate to cover debts the property may be liquidated (sold for cash) in order to make payments.

Note that some property is considered “exempt," meaning that debt collectors cannot reach it. Most of the time, life insurance policies and retirement savings fall into this category. Further exemptions vary from state to state. A local estate planning attorney can help you determine the status of your loved one's property.

Are There Exceptions?

A deceased person's estate is normally responsible for the person's debts, though there are a few important exceptions.

1. Joint Account Holders

Two or more people can jointly hold bank accounts and credit lines. The holders of the account share responsibility. If one holder dies, the other holders are responsible for any associated debt. Therefore, jointly held credit card debt is one type of debt that you will be responsible for if a co-holder passes away.

Note, that there is a difference between an account holder and an authorized user. An authorized user can use an account but is not responsible for any liabilities. In contrast, an account holder is responsible for its liabilities.

2. Cosigners

When someone borrows money, rents an apartment, or takes on some other financial obligation, they may be required to have a cosigner. This provides added assurance that the primary signer's responsibilities will be carried out. If the primary signer fails to keep up with their obligations (for example, when they die), the cosigner is on the hook for the unpaid debt.

3. Spouses in Community Property States

In a few states, property held by a married couple is known as “community property." Generally, this means that each spouse, with some exceptions, equally shares all property acquired during the marriage. The corollary is that any debt acquired during the marriage remains the responsibility of a surviving spouse.

Currently, there are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. A family law attorney can help you sort through the marital property laws in your state.

What About Student Loan Debt?

Federal student loans are completely discharged if the borrower dies. The loan is discharged once a family member or the personal representative of the deceased person's estate submits proof of death to the loan servicer. This is normally done by submitting a death certificate.

Note that this does not apply to private student loans. Determining the status of private student loans when the borrower dies requires a close look at the associated loan documents.

Do I Have To Speak With Debt Collectors? 

No, you do not have to speak with debt collectors — even if the debt is yours. However, this does not stop collectors from using other legal means of securing unpaid debt. For example, a debt collection company may file a lawsuit against a deceased person's estate.

Remember, it is illegal for a debt collector to use abusive, unfair, or deceptive practices when collecting a debt. Many of these prohibitions are outlined in the federal Fair Debt Collection Practices Act (FDCPA). Among other things, debt collectors may not contact you at unusual hours (generally defined as before 8 a.m. or after 9 p.m.). They also cannot harass you by making repetitive calls.

What Should I Do if a Debt Collector Contacts Me?

If contacted by a debt collector seeking payment for a deceased relative's debts, give them the contact information of the estate's personal representative. This person is responsible for settling the estate's affairs, including paying any outstanding debts.

If you are a personal representative, you will want to determine whether the debt is legitimate. Find out the collector's name, their company, and the company's contact information. Also find out the amount owed, the name of the underlying creditor, and how the debt may be disputed or settled for less than the outstanding amount.

Regardless of who you are, do not give any personal information (e.g., Social Security number, birth date, or financial account numbers) to unidentified debt collectors. Many scam artists gather information from obituaries and other public notices of someone's death. They then pose as debt collectors to gather personal information from the deceased person's relatives and use it to commit identity theft and other types of fraud.

How Do I Stop Debt Collectors From Contacting Me Again?

You can stop debt collectors from calling you by mailing them a letter. The Consumer Financial Protection Bureau provides sample letters here to help you draft your demand. You should keep a copy of your letter, send the original by certified mail, and pay for a "return receipt" to prove that the letter was sent and received.

Once the collector receives your letter, they may not contact you again subject to two exceptions. First, a collector can contact you to tell you that there will be no further contact. Second, they may contact you to tell you that they plan to take a specific action, like filing a lawsuit. Keep track of all communications with debt collectors.

Can Debt Collectors Reveal My Relative’s Debt to Others?

In general, it is illegal for debt collectors to publicize an individual's debt. They may only contact uninvolved third parties to find out how to contact the person responsible for the unpaid debt.

However, they may not disclose or discuss the debt with anyone other than you, your spouse, your guardian (if you are a minor), or the personal representative of your estate. If you retain an attorney to handle a deceased person's estate, debt collectors must work through the attorney.

More Information and Filing a Complaint

There are two primary ways to report misbehavior by debt collectors. First, you may file a report with the Federal Trade Commission, the agency responsible for enforcing federal consumer protection laws. Additionally, many states have their own consumer protection laws. You can report violations of these laws to your state Attorney General's office.

Get Legal Help Handling a Deceased Relative's Debt

Losing a loved one and handling their estate is already a difficult life experience. Handling a deceased relative's debt only adds to this burden. Fortunately, chances are you are not responsible for your deceased relative's debts. Find out what your obligations really are by contacting an estate planning attorney near you.