FTC June 2009

Paying the Debts of a Deceased Relative: Who Is Responsible?

After a relative dies, the last thing grieving family members may expect are calls from debt collectors asking them to pay their loved one’s outstanding debts. According to the Federal Trade Commission (FTC), the nation’s consumer protection agency, a surviving relative usually has no legal obligation to pay the debts of a family member who has died. In fact, the rights of surviving relatives are covered by the Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from using abusive, unfair, or deceptive practices to collect from you.

Under the FDCPA, which is enforced by the FTC, a debt collector is someone who regularly collects debts owed to others. This includes collection agencies, lawyers who collect debts on a regular basis, and companies that buy delinquent debts and then try to collect them.

Here’s what the law has to say about who has responsibility for a dead relative’s debts.

• Who is responsible for paying the debts of a relative who has died?
  Generally, someone’s estate is responsible for paying their debts. But if there isn’t enough in the estate to cover the debts, they typically go unpaid.
• Am I legally obligated to pay the debts of a deceased relative?
  You usually don’t have a legal obligation to pay the debts of a deceased relative who was not your spouse. Even a spouse’s obligation to pay may be limited under state probate law. To determine whether you’re legally obligated to pay, talk to an attorney who is knowledgeable about this area of the law.
• What should I do if a debt collector contacts me about a debt of a relative who has died?
  Give the debt collector the contact information of the decedent’s personal representative. That’s the person responsible for settling their affairs, including paying any outstanding debts from the estate. If there is a will, the personal representative is known as the executor; if there is no will, the personal representative is known as the administrator.

Don’t give any of your personal information, like your Social Security number, birth date, or financial account numbers to anyone unless you know who you’re dealing with. Some con artists may check obituaries and other legal notices, and then contact relatives of a deceased posing as debt collectors. These scam artists can use your personal information to help them commit identity theft or other types of fraud.

• Do I have to speak with a debt collector who contacts me about the debts of a deceased relative?
  No. But if you’re a decedent’s personal representative, or otherwise legally obligated to pay the debt, you may want to talk with the debt collector to see if you can resolve the matter.
• Can I stop a debt collector from contacting me about the debts of a deceased relative?
  Yes. If you decide that you don’t want a debt collector to contact you again, write a letter to the collector saying so. Then, make a copy of your letter, send the original by certified mail, and pay for a “return receipt” so you will be able to document what the collector received and when. Once the collector receives your letter, they may not contact you again, with two exceptions: a collector can contact you to tell you there will be no further contact and to let you know that they or the creditor plan to take a specific action, like filing a lawsuit. Remember that even though the collector is prohibited from contacting you again, they still may sue the estate of your relative or the legally responsible person to collect the debt.
• Can debt collectors tell anyone else about my dead relative’s debt?
  Other than to get the personal representative’s location, a debt collector generally is not allowed to disclose your relative’s debt to anyone other than the deceased’s spouse, parent (if your relative is a minor child), or guardian.

For Complaints and More Information

Report any problems you have with a debt collector to your state Attorney General’s office (www.naag.org) and the Federal Trade Commission (www.ftc.gov). Many states have their own debt collection laws that are different from the federal Fair Debt Collection Practices Act. Your Attorney General’s office can help you determine your rights under your state’s law.

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

Many agencies offer Debt Settlement Services, often charging high upfront or ongoing fees when individuals are already experiencing financial distress.

An individual can work directly with a creditor to settle a debt on their own but must have a lump some of money to offer the creditor(s) and be prepared for settlement negotiations.

For example; Molly is behind on her store charge card and owes $1500. Molly negotiates with the creditor to pay 65% of her total debt and the creditor agrees. Molly pays the lump sum settlement amount of $975.

What are the Incentives?
For creditors, the primary incentive is to recover funds that otherwise would have been lost if the account was charged-off to a collection agency or the debtor filed for bankruptcy relief.

For consumers, the primary incentives are to avoid paying debts in full or to avoid the stigma that is sometimes associated with bankruptcy.

What are the Consequences?
A debtor can still be sued during the debt negotiation process. Typically, during the time frame that the debtor is saving funds to make a settlement offer, the creditors are not receiving regular payments therefore the account is in default. During this period a creditor can pursue legal action that may result in wage garnishment or lien.