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Credit card debt immortality

By Janna Herron · Bankrate.com
Friday, September 2, 2011
Posted: 2 pm ET

Here's a morbid thought: Credit card debt doesn't die, even if you do.

That's the takeaway from a report on CNNMoney.com Thursday, which highlights the efforts of Discover to collect credit card debt of a deceased woman. The credit card company called the woman's daughter only two weeks after her mother passed away, asking her to make payment arrangements.

Sounds tacky, right? But the reality is credit card issuers are entitled to do just that. Just make sure they hound the right person, or entity.

"Creditors certainly have the right to pursue the estate for debts owed by the consumer when they were alive," says John Ulzheimer, president of consumer education at SmartCredit.com.  "In some cases, they could sue the estate for payment."

So, the person who should field calls from creditors is the executor of the deceased person's estate. Not the grieving family. If you receive a call and you're not in charge of the estate, simply provide the issuer with the right contact information.

It seems a bit unseemly to call so quickly after a death, but there are no federal rules establishing a bereavement period, says Ulzheimer. In fact, creditors who line up outside the funeral home first may get paid first.

There are scenarios in which family members could be responsible for the dead person's debt. A spouse takes on his or her partner's debts if the spouse lives in one of the 11 community property states. Those states transfer the responsibility to the spouse because the spouse likely benefited from the debt, Ulzheimer says.

Also, if the account is jointly held by you and the deceased, you will take on the debt payment obligation and creditors rightly can come after you.

Some creditors, thinking there's nothing to pursue, still can sell the debt to a third-party collection agency. They can attempt to appeal to family members' common decency, convincing them the right thing to do is to settle the debt and preserve the deceased's reputation, says Ulzheimer.

But they must abide by the Fair Debt Collection Practices Act, which dictates when and how often a third-party debt collector can badger you.

To avoid this situation altogether, you may want to tighten your financial standing and reduce debts while you're still kicking. That way, what you pass along can be divvied up by your loved ones and not your creditors.

Everyone can rest in peace then.

Do you have a similar story? How did creditors treat you while you were still mourning?

Follow me on Twitter: @JannaHerron

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1 Comment
mc
September 04, 2011 at 8:22 am

When I administered my mother's estate, she wasn't behind on any bills, and I contacted all the creditors promptly to let them know what was going on. As soon as I could write checks on the estate, I kept up the payments. We had no problems.