Your unsecured (credit card) debt dies when you die (usually)

[Niko]

Oh, boy. I'm going through this drill right now for my mother's estate.

First, the executor of the estate should send each creditor that can be identified a letter identifying the account, date of death, and include a photocopy of the death certificate and the credit card cut in half. Send the letters by certified mail with return receipt, to the address for communications for each card. Keep copies of the letters. (A few cards will insist on a certified copy of a death certificate, but those are expensive. If they need it they'll ask for it.)

Actually, if there's an executor (or a personal representative in some states), they should send the creditor (1) the court order appointing them executor or PR and (2) instructions for filing a claim with the estate. Note that different states handle things differently, and the process may differ slightly from state to state.

 

[Dennis]

Well, then you A Moral One's will Just Love this one...
1. About a month or so before They Filed bankruptcy, their lawyer told them to go Max out their Credit Cards..
2. They did
3. They were the Best Dressed and had the most Nicest Things living in a Rental Home for the next 5 yrs...
4. They even Bought Some nice Things for other's and the others gave them the cash for them, minus -10%...

Of course, Everything is justifiable..

 

[Gumby]

Dennis:

1.) Your "shift" key appears to be malfunctioning.

2.) If this is a recent story, it sounds like an urban legend, as the Bankruptcy Code was modified in 2005 to make it much, much harder to run up your credit cards before you file and then have them discharged. Even before the changes, creditors could contest this sort of behavior in the bankruptcy court.

3.) Bankruptcy, at least Chapter 7, subjects all your current non-exempt assets to the claims of the creditors. It does not subject your future income to those claims. I could write a book on the reasons the law has developed this way in the U.S., but suffice it to say that the Founders determined the issue to be of such importance that it is among Congress' specifically enumerated powers in Article I of the Constitution.

 

[tryan]

... I don't understand why people are even answering the phone for CC companies ... people, screen these calls!

 

[FinanceDude]

... I don't understand why people are even answering the phone for CC companies ... people, screen these calls!

because they will call and call and make themselves a large nuisance. The executor is whom they want to talk to,I found out because I was the executor for my sister's estate.

I still get 1-2 calls a month about m sister's discharged accounts, and she died in August of 2006.........

 

[freebird5825]

because they will call and call and make themselves a large nuisance. The executor is whom they want to talk to,I found out because I was the executor for my sister's estate.

I still get 1-2 calls a month about m sister's discharged accounts, and she died in August of 2006.........

OMG, this is terrible.
In my state, the use of a telephone to harass is a criminal offense. I would look that law up for your state, get the actual public law citation, and change your answer machine message to inform all callers (these jerks) that you are reporting any continued harassing phone calls to the agency in charge per public law whatever.
Then just don't answer the phone for a little while. I screen all my calls. I will only pick up if I recognize the caller's number or the caller ID kicks in.

 

[JustCurious]

Here is an article about how debt collectors try to collect from the dead...

http://www.nytimes.com/2009/03/04/business/04dead.html?_r=2

 

[Culture]

I would expect my son to pay off my debt, unsecured or not. When my father passes, as his executor I can assure you that all his cc debt, if any, will be paid.

My ethics are not defined by the lack of ethics of others. You may have a different of idea of what is ethical.

However, it it clear that if the assets of the estate do not covered the cc debt, then the cc company should be SOL. I would never pony up my own assets to covered someone else's cc debt.

 

[CyclingInvestor]

Just Curious, I very much appreciate this information. My ethics extend to individuals who would at least possibly have similar ethics toward me. However, since I know CC companies, universities, hospitals, etc. would happily render the decedent’s carcass and sell the grease, I would have ZERO problem about telling them to get stuffed in the situation you describe.

Score one for the home team!

Ha

Agreed. If my heirs pay one penny that they are not legally required to as a result of some collection vultures preying on them, I will haunt them all (and they have all been told this). I do not see this as an ethical issue - this is a business-dealing with companies who know the rules better than I do.

 

[clifp]

I know we have a couple of knowledgeable attorney on the board so I am curious what debt is the estate legally obligated to pay?

Nursing home bill?
Credit Card debt?
Utilities?
Medical bills?
Personal services like attorney fees?

 

[traineeinvestor]

I know we have a couple of knowledgeable attorney on the board so I am curious what debt is the estate legally obligated to pay?

Nursing home bill?
Credit Card debt?
Utilities?
Medical bills?
Personal services like attorney fees?

Under HK law, the estate is generally obliged to discharge all the obligations of the deceased to the extent that the value of the estate assets are sufficient to do so. The law gives priority to some claims - like taxes. If there is a shortfall, the creditor miss out and no one (except a co-signatory or gurantor) is liable.

Certain assets may fall outside the estate (e.g. life insurance ) or be protected (e.g. a matrimonial home in joint names). In some circumstances persons who have benefitted from the deceased's actions (or their own) may be liable to hand over assets or money received from the deceased before death to the estate.

If a credit card company is owed money, they should file a proof of claim and queue up for payment just like everyone else. Attempting to harass others into meeting a debt which is not their responsibility is, at best, unconscionable and, possibly, fraud (attempting to obtain money under false pretences). If the CC company or its agent claims that the heirs of the deceased are personally liable for the debt, ask them to send a written statement. Depending on exactly what is said, it could be a matter for the police.

I would not be shy about making the matter public either.

 

[FinanceDude]

If a credit card company is owed money, they should file a proof of claim and queue up for payment just like everyone else. Attempting to harass others into meeting a debt which is not their responsibility is, at best, unconscionable and, possibly, fraud (attempting to obtain money under false pretences). If the CC company or its agent claims that the heirs of the deceased are personally liable for the debt, ask them to send a written statement. Depending on exactly what is said, it could be a matter for the police.

I would not be shy about making the matter public either.

In my sister's probate case, since she died in Nebraska, the estate attorney filed all the documents there. The CC companies were notified in writing, and they had 30 days to file a claim. of the 4 CC companies involved, 3 did not file a claim, and the one that did filed it in Wisconsin, which was not binding. So, they were all out of luck, and they knew it, but it did not keep them from calling and harassing me for quite a time.............

 

[chemist]

Good point..........When my siblings and i went through this, it was not clear what was required, but we all KNEW our mom would want her debts paid, so it was an easy decision.

+1. I did what my dad would have wished and paid off his unsecured debts from the estate.

 

[haha]

So you see, for most people, there is no need to set up a probate estate for most of the assets to pass. Therefore, there is no need for any fancy trust to be set up to avoid probate. For most people (despite the misleading press reports to the contrary) a will is unecessary. For most people, the only assets that need to be probated are furniture and the odd coin collection that grandpa kept under the bed, but for most people those assets are not worth fighting over.

This is very interesting. I have a few questions that I hope someone can address. If there is no money in the estate, who keeps the heat and water on and the grass cut/snow shoveled until the house gets sold? Who makes the mortgage payments during this period?

Another question- do creditors have to suspend accrual of interest on balances when notified of the death and opening of an estate? If not, can they keep cranking up interest rates on balances?

Who pays the undertaker? From what does an attorney get paid, as many lay people likely cannot proceed wisely without some help?

How about federal or state income tax deficiencies?

As part of the quesitions is the overriding issue of how does the executor get his/her hands on estate cash right away? In some states it can take some time to get death certificates, and if all accounts are passing by benefiairy designation, where does this fast cash access come from?

These are all questions that I have recently come in contact with as a brother died leaving a very tangled and likely bankrupt picture. My sister, who is perhaps on her own trip to bankruptcy is the estate administrator. My other surviving brother who is financially sane and secure may or may not be beneficiary on some 403b and similar accounts, but he lives almost as far away as I do and figures he will get whatever accrues to him whether or not the estate is badly mishandled.

I don't really know what my sister's motivation to take on this project is, but likely the fee that she might get and the furniture that she can haul away figure strongly in the picture.

Ha

 

[huskerblue]

In my sister's probate case, since she died in Nebraska, the estate attorney filed all the documents there. The CC companies were notified in writing, and they had 30 days to file a claim. of the 4 CC companies involved, 3 did not file a claim, and the one that did filed it in Wisconsin, which was not binding. So, they were all out of luck, and they knew it, but it did not keep them from calling and harassing me for quite a time.............

As a Nebraska estate planner, I can tell you that there was a very bad case here a few years back that basically states that a PR needs to notify all known creditors (the old law) and those that SHOULD HAVE BEEN KNOWN.

YIKES! Ye old can of worms opened up with that.

 

[huskerblue]

Originally Posted by JustCurious
So you see, for most people, there is no need to set up a probate estate for most of the assets to pass. Therefore, there is no need for any fancy trust to be set up to avoid probate. For most people (despite the misleading press reports to the contrary) a will is unecessary. For most people, the only assets that need to be probated are furniture and the odd coin collection that grandpa kept under the bed, but for most people those assets are not worth fighting over.

Don't kid yourself, the STUFF is exactly what people do fight about!!

 

[haha]

Don't kid yourself, the STUFF is exactly what people do fight about!!

My sister managed to destroy her marriage by piling the stuff from my parents large house into her small one. No room left for the people, so the sane ones who were old enough (including her husband) left.

I inherited some useful and attractive furnitiure out of my parents place. I gave it to my nieces. I hope they don't wreck their marriages with it too.

I only want stuff that I wouldn't feel particularly bad if someone threw it out the window. (Like we used to do after exams at my U. Usually flaming)

Of course this attitude may be part of what cost me my marriage, so I guess these things can cut both ways.

Ha

 

[Moemg]

My sympathy to you Ha ! Family dynamics can be awful under normal circumstances and under abnormal circumstances it's the pits .

 

[JustCurious]

Take a look at this article that talks about "a dirty little secret" of seniors who rack up lots of credit card debt with no intentions of paying it back since they will die soon anyway.

News Headlines

This is not really a "secret" since we discussed this very issue in this thread more than three years ago.

 

[youbet]

Take a look at this article that talks about "a dirty little secret" of seniors who rack up lots of credit card debt with no intentions of paying it back since they will die soon anyway.

News Headlines

This is not really a "secret" since we discussed this very issue in this thread more than three years ago.

The folks written about in the article seem to be a pathetic lot........

They're not charging up their CC's because they're smart, they're charging them up because their retirements are drastically underfunded and putting $10k - $15k on a CC, with no intention of repaying, really helps them. And they are not doing this on their deathbeds. It sounded like some will have to deal with creditors chasing them for years..........

I'd hate to be in that spot.

 

[Nords]

The folks written about in the article seem to be a pathetic lot........
It sounded like some will have to deal with creditors chasing them for years..........
I'd hate to be in that spot.

The good news is that as long as they [-]charge[/-] pay their phone bill they won't be isolated, lonely, or bored. They might even get personal home visits to help them review their financial situation.

Whaddya do all day indeed.

 

[chinaco]

This is little more than an article that says the same people who were irresponsible when they were younger are on the same track.

They have always been in debt, are still in debt, and will continue to be in debt. They only part of the plan that shifted is whether they default and go through bankruptcy or die first. Either way the lender will try to go after their money.


However, those people that borrow heavily on their credit cards are paying for their own defaults with those extremely high interest rate payments.

They borrow $20k on a credit at 70, pay the minimum payment (seems to be about 4% now) till their demise at 85. In 15 years the bank has recovered almost twice the initial loan in dollars (the original loan amount plus inflation adjustment). And the deceased has accrued a level of debt that puts the creditor in line for payment through the estate. IOW - Loan of $20 which was recovered... now the credit card company owns the house of the deceased debtor. Of course, many of the spendthrifts out there will not have an estate.... but some will.

 

[swampwiz]

I realize it is difficult to discuss ethics and credit card companies at the same time, but if there is enough money in the estate to pay the credit card company, that still seems the right thing to do regardless of the whether or not the estate is legally obligated to do so.

The *right* thing to do from an ethical POV and the fiscally prudent thing to do from a business POV are often quite different. I just went through a Chapter 7 and got discharged of about $140K in unsecured debt, whilst I protected $180K in retirement assets. I did everything that the law proscribed for me to do. The creditors who had lent me the money made a business decision - one that ended up with a sub-optimal result. Many times I have invested equally as sub-optimally, and I don't complain about it because that's the way business works.

 

[73ss454]

I came into this life owing nothing and while living life I had debt till the age of 58. Hopefully when it's time to go I'll be on the check out line owing nada.

 

[BLS53]

I'm not advocating defaulting on debt, but the reality is that the average retired senior has little to fear concerning debt collection. SS, pensions, and virtually all retirement accounts are protected from garnishment. The problem is many of the elderly don't know that, and are easy targets for aggressive collectors. Add to that, many have old school phones plugged into the wall, with no screening, caller ID, etc., and are unwilling to change. As boomers age, the situation will be a lot different. Walking away from mortgages, is just the tip of the iceberg.

There are advocacy groups of attorneys, that do nothing but protect seniors from collectors.

Most here have never been involved with defaulted debt, and have misconceived ideas about what happens. The ball is increasingly in the debtor's court. Elizabeth Warren cut her teeth as a consumer attorney doing this stuff.