In most cases, your debt doesn’t die when you do. You may not care about it because, after all, you’ll be dead at the time. But if someone you care about is on the hook for your debts, they might have a concern or two.
Are you concerned about your elderly parents and their finances? Here’s an interesting post on how to talk with them about money.
Keep in mind that under the law, all co-signors are responsible for debt. That means if someone signs on to your debt, they own it no matter what happens to you.. Creditors will come after their assets to collect on what you owe if they can’t collect from you or your estate. The question is, how do you protect your loved ones? In my experience there are three tactics you can use:
1. Get Out Of Debt Before You Die
Nobody enjoys being in debt and since nobody knows when their number is up, it only makes sense to try your best to steer clear of debt and get out of it as quickly as possible. I figure you already know this. Let’s move on.
2. Life Insurance
The more debt you have the more life insurance you need. (This is another reason why being debt-free saves you money.) If you have a solid financial plan, your debts should diminish overtime so don’t make the mistake of buying too much life insurance for a short-term problem. But depending on your situation, life insurance could be a partial solution.
3. Don’t Get Suckered
As I said, if someone you care about co-signs for you, they are a fair target for your creditors. But the inverse of this is also true. If nobody co-signed your debt, they aren’t going to be held responsible for your debt after you pass. Make sure your family is aware of this.
Some creditor creeps try to guilt-trip and/or lie to survivors and pressure them into paying debts of family members who have passed on. Make sure your family knows what they might have to be pay for and what they certainly will not have to pay for. Along the same lines, if you currently have a debt that you and your loved ones are listed on, try to convert that debt so that only you are responsible for it. This may be hard to do but it’s worth a try. Consider refinancing your debt if the current creditor won’t play ball.
Having said all this, don’t forget that your debts are part of your estate. That means the debts will have to be paid before any distributions can be made to your beneficiaries. But if the assets are not sufficient to pay off the debts, take the steps suggested above to protect your loved ones from debt they really have nothing to do with.
Are you concerned about leaving your family with debt after you die? What are you doing about it?
Calls are just the beginning of the problem…
I also received calls from collections seeking information for a deceased relatives’ alleged debts to various banks because there was no executor or probate to be found…
(I say alleged because how do I know they ever even existed or if they did they were not paid?)
At some point, and these places must have realized they would never see the allegedly owed money via the actual debtors’ estate and decided they would attempt other means…
The next thing I know, trade-lines from collection agencies appeared on MY credit reports, as if they were my accounts, coincidentally with the same balances, from the same original banks, alleged in the phone calls…
(And not small amounts we are talking upwards of 75k just from one bank.)
Calls to the banks got me nowhere, as I was told the accounts were “sold” and I would have to contact the places that bought them…
(Although they did acknowledge that were no accounts for those balance amounts and dates under MY SS number).
The places that bought them claimed the information was given to them from the original creditors, so it must be right and I would have to prove otherwise…even though they have the legal obligation to provide ME with proof, not the other way around…
(As my friend says, “How do you prove a negative?”)
Their attitude is that it is me who is the liar and that I am just trying to get away with something…guilty until proven innocent…
And then they claimed that perhaps I was a joint holder on the cards…(I wasn’t)
I saw on one of the collectors’ websites that deals with debts of the deceased for banks that one of the services they offer is that they would they would “track down the beneficiaries”….
So the beneficiaries could have the bills stuck to them that they do not owe? Bills that could be more than their inheritance, if they even received any inheritance?
I was not the executor and did not receive a dollar from this person’s death..yet what I did inherit is all the headache.
So who is responsible for this fraud? The original bank, the collectors that first had the accounts sent to them, the place they were sold to or some combo thereof?
And yes, there may be legal remedies, but unfortunately I have not have the luxury of making this a full-time job in order to make it go away…
And people wonder why everyone is so “sue-happy”?
Well when people or businesses won’t admit to mistakes and remedy them when the person harmed attempts to resolve the situations amicably, then there is no choice but to start dialing to your lawyer…
Unfortunately, while it’s true that survivors cannot legally inherit the debt, that doesn’t stop the creditors at all. My m-i-l left $20K in credit card debt to Bank of America, who neglected to file a claim against the estate in time so when it went to probate, the claim was thrown out due to expiration of the statute of limitations. BoA promptly sold the debt to a collection agency and we have been hounded ever since (3+ years). One contacted us by mail as legally required and we wrote a cease and desist letter; the others just call day and night, at least once a day and often more. When one agency can’t collect, they sell it to another agency; I think we’re on our 5th or 6th agency now. Acting on legal advice, we simply don’t pick up the calls anymore. We have caller ID on our phone and shut the ringer off; our friends and family know to leave a message and we’ll call back.
Being legally in the right is some consolation, but not a whole lot. Zombie debt is a major and growing problem in the U.S.
Bottom line: if there is someone you really hate and want to get even with after you’re dead, die with lots of debt and make them the executor. They will never again be free of collection agencies.
Neal Frankle says
This is amazingly unfair. I would think there must be some legal remedy for you. Anyway, as you say, there is a difference between being right and what others are able to get away with. This makes me angry to hear that you must endure it.