We share lots of information about living with debt, but what about dying with it? It’s not something any of us like to think about, but debt doesn’t disappear when someone passes and if that person was your spouse, that debt can be transferred to you. The laws surrounding debt settlement after a spouse dies vary by state. Texas is considered a “community property state” meaning spouses who acquire property or debt during marriage own it equally. If the deceased person’s estate is not enough to cover their outstanding debts, their spouse may be responsible for repayment. Here we discuss the different types of debt you might be responsible for when a loved one passes.
 

• Student loans - Federal student loans get discharged if borrowers pass away. Private student loans are much like any other type of personal loan. If cosigners are involved, they’ll be liable for the debt. If there are no cosigners, student loan debt must be paid by the deceased person’s estate. The estate may include jointly-held property, such as a house owned by both the deceased and the surviving spouse.


• Credit cards - If it's a single-party account, the deceased person’s estate is responsible for the unpaid debt. If it's a joint account, the surviving person will continue to be responsible for the debt. If the surviving/responsible joint party is unable to pay the outstanding credit card debt, the creditor could elect to take civil legal action and ultimately obtain a judgment against them. A judgment lien could be enforced in a variety of ways, including placing a lien against property.


• Auto Loans - Car loans with joint names pass to the other borrower. If there's no cosigner and the estate cannot pay off the loan, the person who inherits the car can sell it to pay off the debt or pay for the debt themselves to keep it. If no one can pay off the loan, the lender may repossess it.


• Medical - Medical debt can be more difficult to understand than other types of debt. Many small medical debts are discharged when patients die, but larger medical debts may become the responsibility of the deceased person’s estate or their spouse. It’s recommended to speak to your attorney regarding medical debt due to the complications of the laws surrounding it.


• Mortgage - If your spouse had a mortgage on their home, that debt will only be passed on to you if you're a joint homeowner. If not, the person who inherits the property will become responsible for continuing to pay off the mortgage and payments will need to continue to avoid foreclosure. The good news is that federal law protects the new homeowner from being forced to pay the mortgage all at once.

 

What to do when a debt collector contacts you about your spouse’s death

If you're the spouse of the deceased, collectors can legally speak to you regarding the debt but there are laws in place to help protect you from mistreatment. The Fair Debt Collection Practices Act requires that debt collectors treat you fairly and helps protect you from unfair means of debt collection. Here’s what you can do if a debt collector calls you:
 

• Get an attorney. An estate or probate attorney will help determine what you are responsible for paying and how to do so in your best interest. They can also dispute and negotiate your spouse’s debt and speak to collectors on your behalf.


• Get the details of the debt in writing. In most circumstances, the collector must give you details about the debt during your first conversation or within 5 days of contacting you. You can also ask for a written validation notice. This will provide you with detailed information about the debt and help protect you from being scammed.


• Set boundaries. You can stop a collector from contacting you by writing a certified letter telling them to stop communication. Once received, they're legally obligated to no longer contact you unless it’s to tell you there will be no further contact or that they are taking some specific action. Keep in mind that in doing so, this doesn't make the debt go away and you may still be legally responsible for payment.

When a spouse passes away, the last thing a husband or wife wants to do is worry about the financial affairs of their partner. If you need help with estate planning or guidance on what to do after the passing of your loved one, make an appointment with a Member Relationship Specialist at a Financial Health Center. We're here to guide you through any difficult times you may experience.