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Debt Collectors and Debt after Death


When a loved one dies, there comes grief as well as many financial obligations. One thing that should be clear to those left behind is that when someone dies, their debt remains. Unfortunately, many people grieving over a loss of a family member are taken advantage of by debt collectors. To prevent this from happening, it is good to have the proper knowledge on what is and isn't legal during times of death.

When a family member with debt dies their remaining assets are used to pay off their remaining debts. This is issued by a probate court and usually goes in this order:

1. Mortgage

2. Secured Debts

3. Unsecured Debts

Many times a person's mortgage is the first on the list. After the mortgage is paid the leftover money is used to pay off secured debts such as car loans. Once the secured debt is covered, the last of the money then goes to the unsecured debts such as credit cards.

Credit card companies have two options:

1. Issue the debt as a "loss"

2. Pursue the debt

If a company decides to issue the debt as a "loss" they will send a sympathy letter stating that the debt will be cancelled. They will also provide a 1099-C form that will be used to pay taxes on the cancelled debt. There are no legal obligations for relatives to pay back the debt. However, a debt collector can legally collect money from a family member if that member has co-signed the debtor's loan.

However, if the company chooses to pursue the debt they will attempt to receive their money from the relatives or friends of the deceased. Fortunately, there are laws that prevent the collectors from harassing those left behind.

The Fair Debt Collection Practices Act forbids debt collectors from harassing family members through numerous phone calls and deceptive practices. Overall, when a family member dies it is usually a hard time for those who are grieving to make clear decisions. Educating yourself on the financial commitments and legal obligations will help you avoid debt collection harassment.


We at Timothy J. Sierra Attorney at Law would like to state that our blog posts and links, on our web page or any other social media outlet, to any other web pages are not intended for legal advice. We are not responsible for third party website information. If one is in need of legal advice please contact an attorney directly.

Source: VICE | Debt Collection Harassment

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