Know your rights: Unsecured debts and illegal collection

What can creditors do to collect from an estate?

• A debt collector can only contact the spouse of someone who has died, or the executor or administrator of their estate.

• They can only contact these people once, and only to get pertinent info.

• Collection agents cannot call repeatedly, nor can they contact other relatives, except to get the executor's contact info.

• They are not allowed to threaten you or lie in any way. You are not personally responsible for these debts, and it is illegal to say or imply that you are.

When your loved one passed away, there’s a good chance they left some debt behind. Credit cards, mortgages, medical bills, and even some student loans may still not be paid off. While the last thing you may want to think about right now, while you are still grieving their loss, is debts and how to go about handling them, it’s important to understand what your rights are with regard to creditors. 

In some cases, your loved one’s creditors will send collection agents after you, hoping you’re unaware of which debts need to be paid and which can be ignored. Unfortunately, you may be particularly vulnerable right now and not thinking rationally. So knowing the laws when it comes to any unsecured debts your loved one left behind is paramount.

What are unsecured debts?

Debts fall into two categories: secured and unsecured. Secured debts include things like mortgages and car loans. These debts are secured by assets such as the house or the car, which can be repossessed to pay back what is still owed on the loan. Unsecured debts are debts that are only guaranteed by a promise to pay them, such as personal loans, credit cards, utility bills, student loans, and medical bills.

Debts are to be paid from your loved one’s estate

It’s only after all known unsecured debts have been paid in their entirety that the remaining part of the estate—if there is any left—can be distributed to beneficiaries or heirs. 

It’s important to realize that even if your loved one didn’t leave enough money or assets behind to pay their debts, in most cases you’re not under any obligation to reach into your own pocket to take care of the remaining money owed. The Federal Trade Commission (FTC) is very clear about this, so don’t let debt collectors try to make you believe otherwise.

You are protected from deceptive debt practices

The Fair Debt Collection Practices Act (FDCPA) clearly establishes that debt collectors are not allowed to resort to abusive or deceptive practices in order to collect a debt from you after your loved one has died. In some cases, such practices can include calling repeatedly—not just every day, but sometimes more than once a day—threatening to garnish wages or put a lien on your house, and lying about financial amounts and interest that actually isn’t accruing. This behavior is absolutely illegal. 

Sometimes when a person has passed away, companies will purchase unpaid debts and try to collect on them. This is illegal as well. If there’s not enough in the estate to cover the debts left behind, then it’s absolutely against the law for a third party to try to make money off the death of your loved one.

During the probate process, you (assuming you are the executor or administrator) will need to notify creditors and potential heirs, in writing, that your loved one has died. So don’t start writing checks to creditors yet; this is a long process that can take weeks or months. Once all creditors have a chance to come forward, and the estate is determined to be insolvent, debts will be paid in a particular priority order. If the wrong debt is paid too early, the executor could be held personally liable to pay the creditor who lost out. Therefore it is important to make sure all creditors wait their turn.

You may be responsible for some debts in certain cases

While certain debts will go unpaid if your loved one didn’t leave enough money or assets to cover them, there are some situations in which you could find yourself responsible for what they owe, because you were a co-owner of those debts. For instance, if you co-signed a contractual agreement with your loved one, like a lease or a business loan, you’re required to pay this off if the estate cannot. Similarly, if you were a co-signer on your loved one’s credit card, you can be held responsible for their credit card debt. (Authorized users of a card are not the same as co-signers and have no responsibility for debts.)

There are also states that can allow a surviving spouse to be held responsible for certain debts, such as medical bills. In other cases, adult children may have to cover the unpaid medical debts left behind when their parents pass away. This is called filial responsibility and is on the books in 26 states and Puerto Rico. Particularly if your loved one left behind medical debt, be sure to look into the laws in your particular state in regards to spousal and filial responsibility. 

A person living in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin), is responsible for any debt their spouse incurred during their marriage. If they acquired the debt before the marriage, however, that’s considered “separate property,” and the surviving spouse doesn’t need to deal with the debt.

Debt collectors can contact you, but they can’t harass you

When it comes to collections and creditors, if you happen to be the spouse of the person who has passed away, or the executor or administrator of the estate, debt collectors may contact you, and only you. They can discuss the debts with you, and can get your name and pertinent information if you’ll be the ones handling these debts. But they’re only allowed to make contact once. The only reason they would be allowed to contact you again is if they believe the information they’ve been provided—such as the address or phone number—is incorrect. They can’t bring up the debt again.

Debt collectors can be difficult to deal with. The last thing you need is added stress while you’re already struggling with the loss of your loved one, and you are absolutely within your rights to demand that a debt collector stop contacting you. This can’t be done over the phone; it must be put in writing. Write a letter clearly stating that you do not wish to be contacted by the debt collector again, make a copy for your records, then send the original to the collector via certified mail and request a return receipt for your records. While this won't stop debt collectors from taking further action like getting lawyers involved to make sure the estate pays the debt, it does put an end to the constant calls attempting to intimidate you into paying. 

If they persist despite your letter, you can report the alleged violation and officially file a complaint by contacting the state’s attorney general’s office. You can file a complaint with the FTC as well, by visiting www.ftc.gov or calling 1-877-FTC-HELP. Keep in mind that these companies are very much aware of the fact that what they’re doing is against the law. They are hoping you’ll just pay so they leave you alone, and if you do, there is a financial gain for them—especially if the debt has been purchased by a third party. 

Dealing with money after the passing of a loved one is no easy task, so it’s important to take care of yourself and advocate for yourself if creditors are being aggressive. While they may tell you that they’re just doing their job, the reality is they don’t always abide by the laws. By knowing your rights, you can protect yourself and your family from extra stress during this difficult time.

You may be eligible for free bereavement support. Empathy can help with everything from funeral planning to estate administration, with step-by-step guidance and real-time expert support. Many people get free premium access to Empathy as a benefit with their life insurance claim. We partner with New York Life, Guardian Life Insurance Company, Bestow, Lemonade, and other leading carriers. When you make your life insurance claim, talk to your representative about whether Empathy is a benefit they offer.