Who is responsible for the debt when a loved-one dies?

While you may feel a moral obligation to pay the debts of a deceased relative, the legal obligation is likely different.

The debts of a deceased are the responsibility of the deceased’s estate and are first deducted from the estate’s assets before being distributed in accordance with the priority established by the Texas Estates Code.

If person dies with credit card debt, the heirs are not responsible for paying the debt. The credit card company must be notified and then must make a claim against the estate in order to be paid. Some cards carry insurance that would pay off the amount due at death. If you are handling your relative’s estate, you should certainly not use credit cards in their sole name after their death, even if you were an authorized user, and you should notify the issuer of the death, including sending a copy of the death certificate. It is also a good idea to contact the three credit reporting bureaus — TransUnion, Equifax and Experian — informing them of the date of death and to close the credit profile.

There are exceptions, but relatives are protected from creditors by the federal Fair Debt Collection Practices Act. The law has severe penalties for violations, and relatives who are being tracked down by creditors can file a complaint with the Federal Trade Commission at www.ftc.gov or contact us.

While creditors or collection agencies may call heirs, once they are given the contact information for the person handling the estate (such as a personal representative or executor), the calls to heirs must stop. In addition, collectors are not allowed to mislead debtors into thinking they have a legal responsibility for a debt when they do not.

If there are no assets or not enough to pay the debts, then the debts cannot be paid and are usually “written off” by the creditors.

As always, for advice about your specific situation, please contact our firm or an attorney in your area.