Is death a respite from debt?

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Joined: 05/31/06
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Is death a respite from debt?

Interesting article in WSJ this morning. Can't cut and paste it so will summarize.

Storyline: 68 year old woman loses her husband to colon cancer. After his death, as many as 10 phone calls a day pour in from debt collection firms seeking repayment for the $16,651.52 BOA credit card debt her husband left behind. Calls stated that she was not legally obligated to pay (which is true) then veered off into discussions about how the widow could "get this taken off her plate". She had nothing, she had sold their motor home to help cover medical bills and funeral costs, all that was left was $2,000 in life insurance proceeds. She offered them that "just to get this off of her head".

There is a new movement in credit and debt collection to seek restitution from survivors. Debt collectors say that the survivors have a moral obligation to pay, especially in cases where they benefited from purchases wrung up by someone else. (they don't have any legal obligation, unless they were co signers on a loan).

ACA international, the industries main trade group, says that collecting payments on debts owed by the dead helps ensure that lenders will continue to extend credit at competitive interest rates to older Americans.

Quote from the article "Collectors are starting to realize just how much money you can get from someone when they are at their most vulnerable". One such company, DCM services, manages collections on more than $1 BILLION in deceased debts/year.

Debt amongst Americans between the ages of 65 and 74 is growing faster than for any other age group. The median debt level for that age group is $40,130, up from $27,458 in 2004.

In an FTC investigation, thousands of collection calls between collectors and mourners were monitored. Some debt collectors mislead relatives into believing that they had to pay. Despite that, the FTC recently relaxed guidelines surrounding debt collection: where before collectors were supposed to discuss the dead's debt with a spouse only. Under the new rules, the collection firms may now discuss the debt with anyone believed to be handling the estate, including spouses, siblings, children friends and neighbors.

What do you think? Would you feel a moral obligation to repay your spouses (or parents, or childs) debt upon their death? Do you believe that the process of seeking restitution from those not legally obligated to repay the debt is fair or right? Do you believe that if this was made illegal creditors would be unwilling to lend to the aged or the infirm? Thoughts?

wlillie's picture
Joined: 09/17/07
Posts: 1796

I think if there is an estate, they should pay it for sure. If you are gaining something from a death and someone else loses because of it, it's wrong. I would pay the debt off even if I didn't receive anything for any immediate family member and one or two of my cousins and two of my best friends. Not because I care about the credit card companies in those instances, but because I would want my name cleared so I"m pretty sure they would too.

Joined: 06/04/07
Posts: 1368

After reading this post, I looked up what exactly the FTC says. I agree with what the FTC allows. They can't discuss information on what is owed except to the executor of the estate before it goes to probate, if it goes to probate. They certainly can ask around as to who the executor is which I also agree with. I agree that it should be pursued in their estate. But beyond that, absolutely not. I disagree that it's anyone else's moral obligation to pay for a loved one's debts.

When my sister died, she had student loans that she owed on. They wrote it off immediately without question despite her being married. I think that's the right thing to do. With the loss of her income that was dependent on paying her bills, why should it become someone else's burden to pay for her debt because of something that occurred that was out of their control? Her spouse had enough on his plate dealing with him losing his soul mate, becoming a single parent of a newborn, financial loss, purchasing a new home together a couple months earlier, and medical issues of his own. If it makes the creditors more hesitant with those they consider a higher risk, then they need to rein in what they offer for credit.

Joined: 10/22/06
Posts: 1033

So this is a card only in the husband's name, not a joint card? If it's the case that she is not a signer on the card in anyway, then I don't believe she should personally be held liable and it obviously wouldn't affect her credit. Should the estate pay off the debt? Morally, yes, but it's unsecured debt, so I think it should be last in line. It would be worse if the widow lost her house, than for a cc debt to go uncollected, I think (looking at the overall societal effect).

Joined: 12/10/05
Posts: 1681

The estate should pay off any remaining debt. And I do think the spouse/common law partner should be responsible. Any assets would be transfered to them, so any debts should be as well.

If the lender has no recourse in debt collecting after death, they most certainly will tighten up lending rules to the older demographic.

Joined: 10/22/06
Posts: 1033

"kris_w" wrote:

The estate should pay off any remaining debt. And I do think the spouse/common law partner should be responsible. Any assets would be transfered to them, so any debts should be as well.

If the lender has no recourse in debt collecting after death, they most certainly will tighten up lending rules to the older demographic.

The lenders already have no recourse unless there is a living co-signer though. People die at all ages, so wouldn't they have changed the rules for everyone by now? Unsecured credit, like mentioned in the OP, is always really hard to collect, hence the higher interest rates. Maybe the lenders would just charge even higher interest rates to the older demographic to cover such losses?

Joined: 04/12/03
Posts: 1722

"Beertje" wrote:

After reading this post, I looked up what exactly the FTC says. I agree with what the FTC allows. They can't discuss information on what is owed except to the executor of the estate before it goes to probate, if it goes to probate. They certainly can ask around as to who the executor is which I also agree with. I agree that it should be pursued in their estate. But beyond that, absolutely not. I disagree that it's anyone else's moral obligation to pay for a loved one's debts.

When my sister died, she had student loans that she owed on. They wrote it off immediately without question despite her being married. I think that's the right thing to do. With the loss of her income that was dependent on paying her bills, why should it become someone else's burden to pay for her debt because of something that occurred that was out of their control? Her spouse had enough on his plate dealing with him losing his soul mate, becoming a single parent of a newborn, financial loss, purchasing a new home together a couple months earlier, and medical issues of his own. If it makes the creditors more hesitant with those they consider a higher risk, then they need to rein in what they offer for credit.

My student loans are forgiven if I become permanently disabled or die before they are paid off. Most educational loans through the govt are this way. You can't write them off in bankruptcy though.

Joined: 04/12/03
Posts: 1722

I feel no moral obligation to pay money to my family member's creditors. I didn't agree to the debt and my "benefit" from it is debatable. I don't combine my finances with anyone. Their financial decisions and obligations are up to them.

Interestingly, in a divorce you can assign a debt to one spouse or another but the court can't force the creditor to put it in that person's name. If the spouse assigned the debt doesn't pay, the creditor will come after the person who took on the debt. It becomes a civil matter between the exes.

Joined: 12/10/05
Posts: 1681

"Khaki" wrote:

The lenders already have no recourse unless there is a living co-signer though. People die at all ages, so wouldn't they have changed the rules for everyone by now? Unsecured credit, like mentioned in the OP, is always really hard to collect, hence the higher interest rates. Maybe the lenders would just charge even higher interest rates to the older demographic to cover such losses?

That is what I meant (although didn't say well). If people, especially older people who are statistically more likely to die, are racking up debt then I can totally see creditors either buckling down and not offering them credit or jacking up the interest rates, if dying before paying becomes more common.

Rivergallery's picture
Joined: 05/23/03
Posts: 1301

I would probably pay off my husbands.. depending on what it was for and for what amount and if it would effect my credit etc etc... I would not pay off anyone else unless the law stated I had to. I am against co-signing in general so don't forsee me cosigning in the near future, I might for a child to get an apartment, but I would renig it in a heart beat if they didn't pay. I would never cosign a huge loan but I would help them get a job etc. OR give them money outright for school.

Joined: 04/12/03
Posts: 1722

"kris_w" wrote:

That is what I meant (although didn't say well). If people, especially older people who are statistically more likely to die, are racking up debt then I can totally see creditors either buckling down and not offering them credit or jacking up the interest rates, if dying before paying becomes more common.

Wouldn't this be discrimination? I know in the case of mortgage loans companies cannot take age into consideration. If you have the income, credit worthiness, and would otherwise qualify, they can't deny the loan based on age. Yes, statistically an 85 year old isn't going to live long enough to pay off a 30-year loan, but the bank can't use that as a reason for denying the loan.

Joined: 04/12/03
Posts: 1722

"Rivergallery" wrote:

I would probably pay off my husbands.. depending on what it was for and for what amount and if it would effect my credit etc etc... I would not pay off anyone else unless the law stated I had to. I am against co-signing in general so don't forsee me cosigning in the near future, I might for a child to get an apartment, but I would renig it in a heart beat if they didn't pay. I would never cosign a huge loan but I would help them get a job etc. OR give them money outright for school.

If I'm not mistaken, if it would effect your credit, you would be legally obligated to pay the debt.

Joined: 12/10/05
Posts: 1681

"ethanwinfield" wrote:

Wouldn't this be discrimination? I know in the case of mortgage loans companies cannot take age into consideration. If you have the income, credit worthiness, and would otherwise qualify, they can't deny the loan based on age. Yes, statistically an 85 year old isn't going to live long enough to pay off a 30-year loan, but the bank can't use that as a reason for denying the loan.

I suppose. But, can't a business provide or decline service to whoever they want?

(Admittedly, I know squat about the legalities of finances. But, I do find this interesting)

Joined: 04/12/03
Posts: 1722

"kris_w" wrote:

I suppose. But, can't a business provide or decline service to whoever they want?

(Admittedly, I know squat about the legalities of finances. But, I do find this interesting)

The Equal Credit Opportunity Act (ECOA), which is implemented by the Board’s Regulation B (12 CFR 202), prohibits discrimination in any aspect of a credit transaction. It applies to any extension of credit, including residential real estate lending and extensions of credit to small businesses, corporations, partnerships, and trusts.
The ECOA prohibits discrimination based on

Race or color
Religion
National origin
Sex
Marital status
Age (provided the applicant has the capacity to contract)
The applicant’s receipt of income derived from any public assistance program
The applicant’s exercise, in good faith, of any right under the Consumer Credit Protection Act

As long as it isn't for one of the reasons above, yes, a company can deny credit.

Rivergallery's picture
Joined: 05/23/03
Posts: 1301

"ethanwinfield" wrote:

If I'm not mistaken, if it would effect your credit, you would be legally obligated to pay the debt.

I would work with creditors then and hope my husband and I had figured something else out for my personal care. ... Because I am 10 years younger than him! If I was her though I totally understand not paying the creditors anything.. and might file bankruptcy if valid for the debt, and live off of what little social security that was coming in.. So sad!

Joined: 04/12/03
Posts: 1722

"Rivergallery" wrote:

I would work with creditors then and hope my husband and I had figured something else out for my personal care. ... Because I am 10 years younger than him! If I was her though I totally understand not paying the creditors anything.. and might file bankruptcy if valid for the debt, and live off of what little social security that was coming in.. So sad!

I agree.

Debt amongst Americans between the ages of 65 and 74 is growing faster than for any other age group. The median debt level for that age group is $40,130, up from $27,458 in 2004.

This doesn't surprise me at all. I know people in that age group that invested lots of money for retirement. It has come down so much in value, a rise in the median debt of $13K over the past 7 years doesn't seem all that high.

Alissa_Sal's picture
Joined: 06/29/06
Posts: 6427

It's one thing to hold the estate responsible, but assuming that the estate doesn't cover it, I literally think it is *awful* that a company would try to recoup the losses from a grieving spouse who is not legally liable.

I know my company's stance on this issue (for those small business owners who have signed a personal guarantee.) We do require proof of death which I realize is hard on the families, but once a death certificate has been provided, I am proud to say that we automatically write off the debt.

Joined: 06/04/07
Posts: 1368

"Alissa_Sal" wrote:

It's one thing to hold the estate responsible, but assuming that the estate doesn't cover it, I literally think it is *awful* that a company would try to recoup the losses from a grieving spouse who is not legally liable.

I know my company's stance on this issue (for those small business owners who have signed a personal guarantee.) We do require proof of death which I realize is hard on the families, but once a death certificate has been provided, I am proud to say that we automatically write off the debt.

Do you accept obituaries as well? I know for the colleges, that's all they need and told us that they would get it online for us so we didn't have to do a thing except report the death.

Alissa_Sal's picture
Joined: 06/29/06
Posts: 6427

"Beertje" wrote:

Do you accept obituaries as well? I know for the colleges, that's all they need and told us that they would get it online for us so we didn't have to do a thing except report the death.

I don't remember. It's been about 5 years since I worked with the smaller merchants that would have signed a personal guarantee, so I don't remember what (other than a death certificate) they would take as proof. I only ran into that situation a handful of times when I worked in that department.

elleon17's picture
Joined: 01/26/09
Posts: 1981

The money should be paid out to the limit of the estate. After that, too bad, no money left.

I LOVE my parents, but their debts are not mine and mine are not theirs. I should not be liable for their debts as a surviving kin.

AlyssaEimers's picture
Joined: 08/22/06
Posts: 6697

"elleon17" wrote:

I LOVE my parents, but their debts are not mine and mine are not theirs. I should not be liable for their debts as a surviving kin.

Agreed.

boilermaker's picture
Joined: 08/21/02
Posts: 1984

I think that if there is money left in the estate-- that the "right" thing to do is to pay off that debt. But it sounds like this woman and this estate has no money.

That said, I think that there are some really slimy, rotten creditors out there. And they will call and harass widows, relatives, etc. for money following the death of their loved ones (for debts that these folks do not have an obligation to pay.) It is sick and I don't know how these people sleep at night.

Last time I checked all the major credit card companies were doing just fine in their revenues from credit cards....so I don't have much sympathy for them.

Spacers's picture
Joined: 12/29/03
Posts: 4104

Mu student loans die with me. DH knows he just needs to send a copy of my death certificate to the lender if that happens. An obituary doesn't satisfy the proof of death requirement.

I wonder, if that man's credit cards were used to pay for medical expenses, if that might obligate the wife to pay them? My DH is covered by my insurance, and I'm therefore obligated to pay his insurance-related medical bills such as co-pays and his share of any covered services. So if my DH put those expenses on a credit card, I imagine a collector would legally be able to come to me for payment even though it's technically credit card debt.

Joined: 05/31/06
Posts: 4780

I see student loans as very different ~ no one is out racking up student loans because they know that they are about to die. I could see people maxing out credit cards which don't have a cosigner in the face of a terminal illness. In such a case, where the deceased MAY actually profit from the debt, I don't know that I actually find it unethical or morally repugnant that a creditor would attempt to collect some of that debt.

I think that I would feel somewhat morally responsible for certain peoples outstanding debt, even if I was not legally responsible for it. If my kids died or if my spouse died owing unsecured debt, and I was in a position to pay it back (which I would be solely due to life insurance), I think that I would offer up at least a portion of it or agree to come to some sort of mutually agreeable arrangement with the credit card company.

Joined: 06/04/07
Posts: 1368

"Spacers" wrote:

Mu student loans die with me. DH knows he just needs to send a copy of my death certificate to the lender if that happens. An obituary doesn't satisfy the proof of death requirement.

I wonder, if that man's credit cards were used to pay for medical expenses, if that might obligate the wife to pay them? My DH is covered by my insurance, and I'm therefore obligated to pay his insurance-related medical bills such as co-pays and his share of any covered services. So if my DH put those expenses on a credit card, I imagine a collector would legally be able to come to me for payment even though it's technically credit card debt.

Sure did for my sister. They even looked it up online for us. We sent them nothing.

I also think that they still can't go after you for medical bills unless you signed at the hospital as a guarantor of the debt. There are so many people who are covered under someone else's health insurance and they are legally not responsible for the person's medical expenses. Case in point are children ages 18-26. The parents are not financially responsible for their medical expenses even if they are covering their insurance as a dependent.