The death of a loved one can be difficult to take. However, handling a deceased loved one’s financial affairs can seem even more difficult if he left behind debt. When you start receiving letters demanding payment for a deceased relative’s bills and the debt collectors begin calling, it’s imperative that you know your rights as a consumer to avoid being swindled into paying debts you don’t owe.
Co-Signer and Co-Borrower Responsibility
Unfortunately, you will be on the hook for any debt the deceased person had for which you were a co-borrower or co-signer. For instance, if your child passed away and you co-signed on his car loan, you are fully responsible for paying that loan back, even though you never once drove his car or ever plan to. Thus, the first thing you should do is take full stock of all of your loved one’s debts to see if anyone else, including you, is a co-signer or co-borrower on any of them.
Community Property States
Usually, if your name is not on an account the deceased person owed, you can’t be held liable for the debt. However, this is not the case in 10 states, which have community property laws. In such states, spouses can be held liable for debt incurred by a now-deceased person even when they were not co-signers or co-borrowers, because all assets and all liabilities are considered community property. These states include Arizona, California, Texas and Wisconsin.
Collecting via Inheritance
Even in cases when you are absolutely not legally on the hook for a deceased loved one’s debt, you may pay for it, albeit indirectly. That’s because while you may not actually pay a penny out of pocket, the creditors can force the deceased person’s estate to pay the debts, thus reducing the amount of money or property available to be passed on to the heirs.
Saying 'Tough Luck'
If you are not legally liable for a deceased loved one’s bills and there isn’t enough money or property in his estate to pay off the debt, the creditors are simply out of luck. However, they may still try to strong-arm you into paying. Send the creditors a certified letter, explaining that the debtor has passed away and that you are not legally responsible for the outstanding amount. If a creditor tries saying that you are a co-signer or co-borrower when you know you are not, ask it to provide proof of the claim.