What happens to debt when you die?

[tinfoilhat]

My mother passed away about a year ago and she has a ton of medical bills and a few CA's calling.

What happens to the debt?

[lrprn]

I'm sorry for your loss, Tin.

Assuming your mother's medical debts were unsecured and that no one co-signed to be responsible for them before her death, then the unsecured debt dies with her. You can't inherit a debt unless you were also legally responsible for it before she passed away.

In this case, make copies of her death certificate and mail one to each of the unsecured CAs that are calling by registered return receipt. That should stop the calls.

[DeadManCrawling]

I am sorry for your loss.

We are going through the exact same thing, for my father in law.

My MIL passed away a month ago, and LRPRN is correct, but it is very easy to get snagged by the debt, depending on your circumstances.

When my MIL got sick and went into the hospital, she needed a hip operation and was taken there in an ambulance. She was admitted via emergency room and kept there for 2 weeks, as well as ICU and many specialists came to see her.

Someone had to sign for her, since she was unable to sign any papers for herself. That someone was my father in law, who in signing, agreed to take on her bills. There was no other way about it. Either SOMEONE signs, or they refuse the care.

As a consequence, his efforts to keep his wife treated and alive ended up leaving him on the hook for over 100k in medical bills.

We are taking him to meet our attorney Thursday. This is all the more sad because he suffers from mid-stage Alzheimer's disease and has no idea what any of this means.

Best of luck to you, in all your decisions.

-dmc

[eddiep]

I too am sorry for your loss. My dad passed away two years ago. His debt did not die with him. When settling the estate all of his creditors had the opportunity to file a claim against the estate. Much like bankruptcy the claims will be given priority attorney fees, funeral expenses, and secured creditors come first all the way down the line and the executor of the estate will have to prepare an accounting of all assets. His business, home, boats and vehicles had to be liquidated to satify his creditors. His estate was responsible for all debts including storage fees, medical bills, credit cards, the electric, phone, and cable companies had to be paid too. We even had to refund a $50 reservation deposit that he had accepted. Before he passed away he put two VERY large boats in a shipyard for the winter. The economy had begun to tank by then and we never got any offers. We eventually agreed to surrender the boats back to the lender because the storage fees eventually ate up most of the equity. There are exemptions that can be claimed by a spouse or dependant child. Do I sound bitter? Yeah a little, I got $91 and various household items after all his creditors were satisfied. So yeah, you will inherit her debt if she had assets!

[JRScott]

Good advice here.

First you should notify the creditors that she is dead as indicated above with copies of the death certificate.

The next question would be concerning her assets. If she had none then there is no death estate and it ends there. However if there is an estate then whoever is executor has to administer it much like you would a bankruptcy estate....many people who are not lawyers hire lawyers to do this.

[StartingOver08]

I am sorry for your loss.

Please be very careful when you deal with the collectors that call for your mothers debt. They have apparently trained the collections agents to collect on this type of debt by inducing guilt feelings from family members, even if the family member does not owe for the debt! Here is an article that explains it a little better: http://www.nytimes.com/2009/03/04/business/04dead.html

[MSbklawyer]

I'm sorry for your loss, Tin.

Assuming your mother's medical debts were unsecured and that no one co-signed to be responsible for them before her death, then the unsecured debt dies with her. You can't inherit a debt unless you were also legally responsible for it before she passed away. About the only thing correct in that response is that you don't inherit the debt and have no liability for it unless you had agreed to be responsible for it.

In this case, make copies of her death certificate and mail one to each of the unsecured CAs that are calling by registered return receipt. That should stop the calls.

This is, simply, completely and absolutely WRONG. Most debts, even unsecured ones, do not die with the debtor. Student loans, by statute, are an exception and do die with the debtor. The debtor's personal obligation to pay the debts dies with her, but the holders of a decedent's debts have a claim against the estate of the decedent. The estate is all property she owned at the time of her death.

In fact, death can be thought of as the ultimate Chapter 7 Bankruptcy - except there are no exemptions and no exceptions to discharge: The debtor's personal liability is discharged and the creditor are allowed to recover their debts pro rata from the 'property of the estate'.

In actual practice, if the decedent only owned everyday personal property,(cookware, furniture, wardrobe &c) the creditors write it off and never pursue a claim as it is economically impractical to do so. However, if she owned land or high value personal items, the creditors' claims have attached and you will need to have an estate opened and administered for her before title to these items can be legally transferred to her heirs or any potential buyers of the property.

[DeadManCrawling]

Glad you posted that, MSBkLawyer.

I (and others I think) were basing some of our suggestions on the assumption that the debtor passed away without assets. In Florida, a debtor who dies with no estate to speak of is very different from a person who had assets that can be sold in probate.

Without any real assets, the debts are generally written off. In my mother in laws case, she has no assets but father in law signed for massive medical debt, when she had to be hospitalized. This has led us to a BK filing for him, since he is on SS and has virtually no chance of conquering a 100k medical cost on a fixed income at age 74.

If she had assets, this would have been very different, and we would have had to probate all the debts, giving, as you say, creditors a couple months to file claims. One lesson to learn as well, that we got lucky on: If you have life insurance, Florida law exempts it in its entirety from paying for the deceased's debts, but only if it is paid to a specific beneficiary or heir. That means a life insurance policy in which her husband is the beneficiary named cannot be used to pay for her debts. But if the check had been payable to "The Estate Of Mother In Law" the money would HAVE to be paid to creditors. So doublecheck your own laws in your state, since this is a very easy thing to change, saving your heirs a lot of pain and lost funds.

However, the life insurance is NOT protected from Dad In Law's creditors, many of whom are actually HER creditors, since he had to sign for responsibility or the hospital would have refused treatment. That is what brought us to start working on a BK for him.

Also, death of one spouse would seem to end all Tenancy By Entireties protection as well, which could be a significant problem for surviving spouses in some states who have used TbE to protect assets in life.

In any case, death and debts are far more complex than most of us want to handle without an attorney, and I hope you have one, especially if there are any assets at all.

[lrprn]

Thanks for the clarification, MSbklawyer. TinHat didn't mention assets or an estate, so I assumed she had none at her death and answered accordingly. Appreciate you jumping in to correct the answer in case she did.

[HHM]

Even if the estate has assets (preferably minimal assets), you simply need to send notice to the creditors of the death, and most will go away.

[eddiep]

Even if the estate has assets (preferably minimal assets), you simply need to send notice to the creditors of the death, and most will go away.

HHM
I don't know about that, I can't think of any creditors that went away. In the state he lived in we had to notify all known creditors and had to post notices in the paper. The creditors had one year to file a claim. Again, yeah a little bitter

And also like bk there are exemptions availble but differ from state to state.

It is true, the ultimate chapter 7.

[Flamingo]

My mother passed away about a year ago and she has a ton of medical bills and a few CA's calling.

What happens to the debt?

To be brief as I could go on further but am running late to leave the house for work, did your mother have a will? If so in that will is named the executor(trix) of her estate who is responsible for carrying out the responsibilities of filing the will with the Register of Wills in the county/state in which she resided. The executor is responsible for gathering all the informaton as to assets and debts and pay the debts from the estate. Most wills have a general clause which instructs the executor to pay all debts from the estate as soon as possible after death. If your mother died intestate (without a will), state laws apply. If there is an executor, turn those calls over to that person who is responsible for having her estate probated.

[Ifonly]

Depends on the assets,etc. My father just passed in December with cc debt and a few hundred dollars owed to the nursing home. Since he had only $700 in cash and no other assets (Medicaid), I simply refused to probate the will. The checking accounts will sit in limbo until a creditor either files a motion to take the little bit of money after doing an asset search or until the state takes the money. I checked with the family lawyer and no one can make you probate a will. Since he left my brother all of his cash and there wouldn't be any cash after the debt anyway (there isn't even enough to pay an attorney to probate the will), there is no reason to bother. I told all of the debtors, sent death certificates and no ignore all of their mail. I even refuse delivery of certified or FEDEX packages in his name. He is deceased, end of story. With no will being probated, there is no heir. Now if someone dies with assets, that's a different matter - house would be sold to pay the debt, etc.