When a family member dies, it can be devastating to everyone involved. If the person who passed away also carried a lot of outstanding debt, surviving family members may have the added burden of having to deal with debt collectors. Whether any family member legally has to pay the deceased person's debt depends on what state the debtor lived in, what kind of outstanding debts she had, and whether or not there are estate assets that can cover the debts.
Probate Process
While laws vary from one state to another, generally a probate court process is started that is designed to handle the deceased person's assets and liabilities. When the deceased person has assets such as a house or land, retirement accounts, investments or general banking accounts, the probate court uses those assets to pay off any debt the deceased person left behind. If the deceased person did not have enough assets to cover her outstanding debts, in most cases the debts are simply written off because the estate is declared insolvent.
Estate Payments
As part of the probate court process, an estate executor or administrator is assigned if the deceased person did not designate one. The executor is responsible for gathering all related information about the assets and liabilities left by the deceased person, and notifying all creditors of the death. Once the probate court has the required documentation, it makes a decision about selling or liquidating assets so that all remaining debts can be paid off in full. This process makes it so that the deceased person's estate pays off outstanding debts instead of requiring the family to do so.
Joint Accounts
There are two cases in which a family member may be legally obligated to pay off a person's debt when he dies. If one or more debts is set up as a joint account or has a co-signer attached to it, the joint account holder or co-signer can sometimes be legally obligated to finish repaying the debt. In community property states, a husband and wife are both responsible for the debts of a spouse even if only one name is listed on the account.
Creditor Collection Tactics
Even though most family members and heirs are not responsible for paying off a deceased person's debt, many credit and collection agencies attempt to get them to do so anyway. If a creditor or collection agency calls you to try and talk you into paying off a deceased family member's debt, refer them to the estate administrator for their repayment procedure. Do not assume you must make the payments. When in doubt, contact a lawyer.
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