Late dad’s secret debt won’t stay buried

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Dear Debt Adviser,
After I ran up big gambling debts, my father took out about $35,000 in unsecured debt to pay them off for me. My mother knew nothing about it. I was making all of the required payments to keep the accounts current. My father recently died unexpectedly. He had no assets in his name, and he left no will. All of my parents’ assets are in my mother’s name and in a trust. My question is, will the debts of my father disappear? Or will the credit card companies do an asset search and go after my mother? I am not sure if I should continue to pay on these debts.
— Bad Gambler

Dear Bad Gambler,
Please accept my condolences on the loss of your father. My initial reaction to your letter is to recommend that you have a heart-to-heart talk with your mom. The combination of the loss of a loved one, the shock of a surprise debt and finding out that you burdened your father with a large financial obligation without her knowledge are likely to result in a great deal of anger. Be prepared! Your mother may feel a sense of honor regarding your father’s name and ask that you continue to pay back the debt. After all, it was incurred to pay off your gambling losses. She has four options.

First, as I said, she can ask you to pay the creditors as you have been. Second, she can ask you to pay her and she can make the payments. Third, you can pay her and what she does with the money is up to her. Fourth, she may have a legal option not to pay the debt and let you off the hook. It’s her decision, in my opinion. I hope you’ll go along with whatever she decides, for the sake of your relationship going forward.

Legally, if your father had no assets in his name, then unsecured accounts in his name in most cases should be uncollectible after his death. The executor of the estate would need to acquire certified copies of your father’s death certificate to send one to each of his creditors. To find out where to send the certificates, give the creditors a call and explain the situation. Once you have the addresses, send a copy to each creditor by certified mail with a return receipt requested. I suggest someone follow up with the creditors once you know they have received copies of the death certificate, to assure the accounts have been closed.

However, there is a scenario where your mother may be found liable for the debt. The fly in the ointment would be if she and your father were legal residents of a community property state. (Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin). In a community property state, spouses are liable for debts incurred during a marriage whether they knew about them or benefited from them or not. Creditors may be able to sue in court to have your mother pay for the accounts in these states. I would recommend that you and your mother seek advice from an attorney to learn more about the laws that pertain to her situation.

What you must do at the first opportunity is tell your mother about the debt. Liability issues aside, it is very likely the creditors will eventually contact your mother. You don’t want your mother to be blindsided by calls from the creditors, especially while she is in mourning. Some creditors may try to persuade your mother that she is responsible for paying the accounts, whether she truly is or not. Your mother needs to be prepared with how she will respond to these likely calls. As you work though this family situation, I urge you to put your mother’s feelings ahead of your finances. You can always revisit your strategy at a later date. But for now, be supportive and make the payments if that’s what she wants.

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