When a close family member dies, are you going to be stuck having to pay their debts? Will you find yourself getting harassed by creditors and debt collectors for debts you didn’t even run up or benefit from?
The answer depends on the situation. When people die, their estate goes into probate, and the estate owes the debt. Debts must be paid before heirs can receive their inheritance, and secured liens such as a mortgage on a house or a car loan, will be paid first. Creditors are notified of the debt, and they must file a claim against the estate in order to receive payment. If there isn’t enough money in the estate to cover the debts, they typically go unpaid. But there are exceptions to this rule and times when collectors can and do try to collect debt from the family.
To make sure you and your family members are protected, it pays to seek the guidance of an attorney experienced in debt and probate matters. The skilled and seasoned Ohio debt-relief attorneys at Fesenmyer Cousino Weinzimmer understand that financial problems can happen to even the most well-intentioned people. We offer a free consultation to evaluate your entire financial situation and determine the best way to avoid having family members inherit debt.
Contact us online or call one of our conveniently located office branches to set up your free consultation.
What the Law Says
The federal Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from using abusive, unfair, or deceptive practices to try to collect a debt. However, collectors are allowed to contact and discuss the deceased person’s debts with that person’s spouse, parent(s) (if the deceased was a minor child), guardian, executor, or administrator. So collection agencies may keep trying, and you may still be harassed.
In Ohio, the Ohio Revised Code §2117.25, Order in Which Debts to be Paid, governs the handling of a deceased resident’s assets and liabilities. Typically, debts are to be paid only to the extent of the estate’s non-exempt assets, including the house, bank accounts, cars, furniture, and tangibles in a financial institution. In addition, Ohio probate law grants surviving spouses and minor children a combined $40,000 support allowance which comes off estate funds before creditors are paid.
Property securing a debt, such as a mortgage on a house or a lien on a car, can be seized and sold to pay off the debt. If there is an outstanding home-equity loan, the lender can force immediate repayment of the loan and may require sale of the house.
In the case of a vehicle, the lender can repossess the vehicle unless the person who inherits the vehicle chooses to take over the payments — if the lender allows.
There are assets that are protected from being used to settle debts, including:
- Life insurance policies, pension plans, and 401(k) plans which go to the designated beneficiary.
- Accounts designated as “transfer on death” (TOD) or “payable on death” (POD).
- A joint account with right of survivorship will pass assets directly to the surviving owner and is protected from claims.
- A trust, a separate entity which the gives specific instructions to a trustee on how to distribute assets and pay creditors, or allows the trustee to pay the debts, is usually exempt from claims by Ohio
- Co-signers of privately held student loans remain responsible, but federal student loans are discharged upon death.
Credit Card Debt
Family members are not responsible for debts on credit cards solely in the name of the deceased. Credit card debt is considered low priority, so if there are not enough assets in the estate, credit card debt or other unsecured debt may go unpaid. However, Ohio law allows the creditor to file a claim against the estate, and that debt still must be paid before heirs can receive their inheritance, so it is possible that estate funds will be used up to satisfy creditors. Creditors have six months in which to make a claim against a deceased person’s probate estate, or they cannot collect that debt.
Family members who cosigned a loan or credit card or have a joint account will be responsible, even if all the charges were made by the deceased. Authorized signers or additional cardholders on credit card accounts are not liable, as they didn’t originally apply for the credit.
In some cases, unsecured credit accounts may be covered by credit life insurance, which pays the outstanding balance in the event of the account holder’s death.
Dealing With Debt Collectors
Bill collectors know the law, but often will attempt to collect by calling the survivors and asking them to pay their family member’s debts. If you are not obligated to pay by law, make sure you tell the collector “no” and not to call again.
If you are a surviving spouse or child of a deceased person and have no legal responsibility for their credit card debt, the Federal Trade Commission says it is illegal for credit card companies to hound you for payment. If this happens, contact an experienced Ohio probate attorney for guidance.
Contact us for Help
While most debt typically belongs to the person and is not passed on to surviving family members, there are lots of details that can complicate the question. The experienced Ohio debt-relief attorneys at Fesenmyer Cousino Weinzimmer understand these issues and can help find solutions.
Don’t delay. Take control of your financial future and learn more about how you can make sure your heirs won’t be stuck paying for your debts. Contact us online or call one of our conveniently located offices for your free consultation so we can determine what solutions will work best for you.