By: Jessica L. Estes
The last thing anyone wants when a loved one dies is to be harassed by that person’s creditors. Unfortunately, it happens all too often. The mail comes, and in it, a letter from a creditor expressing their condolences and wanting to know who is responsible for paying the bills. Having just lost a loved one, you are not sure what your obligations are, nor is that your top priority. Likely, you toss the letter aside; you will deal with it later.
But, the creditor will not be deterred and a couple weeks later, another letter comes. This time, the creditor references the prior letter that received no response and again asks who the responsible party is. Having had some time to process everything, you read the letter and notice it is an official “attempt to collect a debt” and get worried that you may be in trouble if you do not pay. So, you assume responsibility for the debt and set up a payment plan with the creditor. Or, you try to negotiate the debt and only pay a portion of it. This makes the creditor happy because you just assumed a debt for which you may not have been liable. But, at least the creditor is gone and will not bother you anymore, right? But at what cost?
I hear this a lot and usually only after the person has already assumed the debt and/or made payment, which is too late. Unfortunately, creditors know that right after a death you are not in the right state of mind to be dealing with them and often take advantage of the situation. Do not succumb to the pressure.
Legally, the only person responsible for a debt is the one who incurred the debt, or who guaranteed a debt. Once that individual dies, the only responsible party is that person’s probate estate. Generally, creditors have six (6) months from the date of the decedent’s death to file their claim against the decedent’s estate. If the creditor fails to file timely their claim, the creditor is forever barred from collecting it. This is true even if a probate estate is not opened within six (6) months; the creditor still has an obligation to file their claim with the Register of Wills for the county in which the decedent resided at death, to preserve their claim. And, if the decedent did not have any assets to probate, even if the creditor timely files their claim, they will not be paid, as there will not be any assets in the estate from which to pay them.
Moreover, there is a difference between unsecured and secured creditors. Typically, unsecured creditors are the ones sending these types of letters, as their debts are not tied to any assets from which they can collect the debts (e.g. credit card companies). Secured creditors, on the other hand, have collateral which may be sold to pay off their debt (e.g. a mortgage company has the right to foreclose on the property securing the debt if payment is not made). Secured creditors are not necessarily bound by the same rules as explained above, since secured creditors always have the right to sell the collateral to pay off their debts any time payment is not made. (NOTE: If you want to keep the property that secures the debt, make sure payments continue to be made.) But, if the collateral’s value is insufficient to cover the entire debt, the secured creditor must also timely file a claim as indicated above, or any portion of the debt the collateral does not cover will be forever barred.
So, the next time you or someone you know receives one of these letters, let the creditor know you are not the responsible party.