My Husband Just Died And Debt Collectors Are Calling!

Susan went through a very hard time when her husband, Steven, died.  Not only was she grieving the loss of her husband, but she had to deal with so many other things – making funeral arrangements, contacting Steven’s employer, the life insurance company, their lawyer, the bank.  And on and on it went.  And then, in the middle of all this, Susan started getting calls from a debt collection agency.  Her husband had a credit card under his own name.  But the collection agency was pressuring Susan, insisting that she must pay off Steven’s credit card debt.  The agency was relentless, calling repeatedly, demanding payment.  Susan just didn’t know what to do.

Fortunately for her, Susan had an attorney shepherding her through the whole estate probate process.

The attorney informed Susan that she was not personally responsible for paying off her husband’s debt.

1. When a deceased person dies, his personal assets become his “estate.”  Generally speaking, debts are paid out of the estate.  If there isn’t enough money in the estate, creditors (and their debt collectors) are out of luck.

2. Susan’s husband designated her as the beneficiary of his $100,000 life insurance policy.  Since life insurance left to a designated beneficiary is not included in the probate estate, the insurance money Susan inherited was not subject to creditors’ claims.

3. Susan’s husband also designated Susan as the beneficiary to his 401K.  Retirement accounts left to a designated beneficiary, such as 401Ks and IRAs, are usually protected from the decedent’s creditors.  This was the case for Susan, and it meant that the 401K money she inherited was also not subject to creditors’ claims.

4. Susan and Steven resided in New Jersey, which is not a “Community Property State.”  Consequently, Susan’s home, which she owned jointly with her husband, was also outside the reach of Steven’s creditors.

5. Finally, Susan had not jointly applied with her husband for the credit card; she had not co-signed the application.  Since the card was only in Steven’s name, Susan was under no legal obligation to pay his credit card bill.

Given the circumstances, Susan did not pay the collection agency.  However, this is a cautionary tale.  When faced with a deceased loved one’s debt, there are so many different circumstances and corresponding legal considerations.  It’s best to consult with an expert.  Don’t be intimidated by debt collection agencies.  Gathering information and speaking with reputable experts is the way to go before you do anything else!

Getting Legal Help:

Experienced Estate Planning Attorney, Elga A. Goodman, can advise you regarding your deceased loved one’s debts and your obligations.  Contact us today at 973-841-5111.

The information contained herein is for informational purposes only and should not be construed as legal or tax advice.  The persons and situation discussed are fictional.  Any resemblance to real persons or to real life examples is purely coincidental.


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