Marital Debt & Death

Debts incurred during a marriage are considered "marital debt" and can be the responsibility of either spouse or both spouses. Confusion often arises, however, when one spouse dies and leaves behind debt. This can result in collection calls from creditors and additional stress for the grieving widow or widower.

Facts

When an individual opens a credit card account or takes out a loan, only he is responsible for the debt he accrues. Lenders who offer credit cards and loans understand that doing so always carries the risk of nonpayment. Unless another person, such as a co-signer, is equally responsible for repaying the debt, the creditor usually cannot legally pursue anyone else for the deceased individual's debt. According to a March 2009 article in "The New York Times," however, the debtor's spouse is often the prime target for collection calls from creditors who want repayment regardless of where the funds come from.

Considerations

An individual's spouse may be held responsible for her debts after her death if he co-signed for any of the accounts, is a joint account holder or if the couple lived in a community property state. Co-signers agree to pay in the event the primary account holder cannot--even if the primary account holder dies. A joint account holder holds equal responsibility for repaying a debt. Thus, the death of one account holder merely transfers the full legal burden of the debt to the other. Community property states consider all assets accrued during a marriage the equal property of both spouses. Depending on the state, marital debts may be joint property as well and owed by both spouses.

Misconceptions

If an individual dies while carrying credit card debt and his spouse holds a credit card on the account, she may continue making payments to the creditor believing that she is a joint account holder and responsible for the debt. In reality, she may just be an authorized user. An authorized user is any consumer that the primary account holder agrees to add to the account and allows to make purchases. Authorized users, however, are not responsible for repaying the primary account holder's outstanding debts.

Effects

If a creditor wishes to recoup its losses, it has the option to file a claim against the deceased individual's estate. Should the debtor's assets cover the amount she owed, her creditors get paid and the executor of the debtor's will allocates any remaining funds to friends or family members. If an individual dies without any assets, however, his estate is "insolvent." Creditors must then write off the amount the individual owed as a business loss since it is noncollectable.

Warning

The fact that an individual's spouse isn't legally responsible for repaying his debt after he passes away is unlikely to stop creditors from trying to collect, anyway. The Fair Debt Collection Practices Act strictly prohibits both harassment and disclosing details of a debt to a third party. Should creditors and collection agencies pursue the debtor's spouse, she has the right to seek legal recourse against these companies by filing a lawsuit.