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Debt after Death: What Happens when a Debtor Dies

What happens to your debt after you die is not a topic that’s likely to come up on its own at the dinner table, but it’s a good idea to talk about this matter anyway. It’s important for you and your loved ones to know when you’re responsible for each other’s debts post-mortem—and when you’re not.

A recent post from WalletPop.com offers an outline of what to expect after the death of a family member who owed money. Here’s a summary.

• Can debt be inherited? In most cases, debt does not automatically pass from one family member to the next, according to sources. That means that, if you receive a letter from a creditor demanding payment on a loved one’s debt after his demise, it’s a good idea to do some research before paying.
• Debt in community property states: One of the exceptions to the above rule has to do with state law. If you live in a community property state (find out here), you can inherit debt from a dead spouse (but not from a sibling or parent).
• The link between debt & inheritance: Another exception involves the relationship between a person’s debts and her legacy. If, for example, a parent dies and leaves you money or a house in addition to consumer debt, you’re legally obligated to pay the debt before collecting the inheritance.
• What about debt from a co-signed loan? If you co-signed a loan for a family member or friend and that person passes away, you are responsible for paying the remainder of the loan.

How to Know if You’re Responsible for a Debt

One unfortunate truth about debt and death is that some creditors might try to collect on a debt whether or not it’s legal for them to do so. Worse, some scam artists may specifically target survivors in an attempt to trick them into paying money they don’t really owe.

If you’re mourning a loved one, the last thing you likely want to deal with is finances, but following these guidelines might help protect you from fraudsters:

• Avoid sending a creditor any money at all until you’re sure that you are actually responsible for repaying a debt.
• To determine your obligations, ask the creditor to send you written documentation of the debt’s original purpose, the terms of the debt and the exact amount currently owed.
• If possible, consult an attorney to help you work through the complexities of covering debt’s after a loved one’s demise.

Posted in Creditors, Financial Literacy, dealing with debt, debt after death | Comments Off

Dealing with Debt Collectors: What Not to Do

As the Great Recession continues to take its toll on the economy and employment landscape, millions of Americans are finding themselves struggling to manage and eliminate their debt. But that’s rarely an easy task, especially during high-stress interactions like contact from a debt collector.

It’s important to remember that, even though you owe someone money, you still have rights: you can and should expect to be treated respectfully by collectors and, no matter how much pressure one puts on you, there are a few things that analysts suggest you should avoid.

Here’s a look at some of those no-nos, adapted from this article:

• Sending a post-dated check: While it may be tempting to get a debt collector off your back by sending a post-dated check to cover what you owe, sources indicate that it’s generally not a good idea. Why? Some collectors, it seems, have been known to deposit such checks early, and most banks permit them to do so. This could leave you with bounced check fees and other unpleasant matters to deal with if you don’t have sufficient funds in your account.
• Divulging your bank account number: No matter how much money you owe, debt collectors are not legally entitled to your bank account number or other sensitive financial data. Even if you decide to make regular payments from a certain account, opt for a money order or a cashier’s check from a bank other than your own. If you’ve already given out an account number, keep a careful eye on the activity in that account and be prepared to challenge any withdrawals you haven’t approved.
• Indicating that you’ll be applying for a loan: Sometimes, before applying for a loan, consumers attempt to clean up their credit reports by paying old debts and trying to get rid of other negative information. But letting a collector know what your goals are can work against you—instead, if you choose to contact a creditor, ask him to verify a debt in writing. Then, ask for written proof that he will remove the negative information from your credit report after you’ve paid; once you receive that proof, you can repay the debt.

The difficult economy has meant that more Americans than ever are struggling with day-to-day expenses, and the FTC noted that complaints about debt collectors rose by 12 percent in 2009 and outnumbered all other complaint types.

For a more detailed look at what you can expect, check out this page on your consumer rights with debt collectors. Further, know that debt collectors cannot legally contact you:

• To collect debts whose statute of limitations has passed;
• To collect debts that have been discharged in bankruptcy; or
• To collect debts while bankruptcy’s automatic stay is in place.

Posted in Credit and Bankruptcy, Creditor Harassment, Creditors, automatic stay, collections | Comments Off

Debt Collectors Behaving Badly (And How to Make Them Stop)

Debt collectors in certain areas of the country have begun contacting debtors in more and more harassing ways, according to a recent article from WNEP in Pennsylvania.

This situation is troublesome not only because it can cause fear and embarrassment for debt collectors’ victims, but also because such techniques are illegal.

The Slimy Tactics Reported by Victims

While repeated phone calls from a bill collector may be irritating, some of the actions that are being attributed to collectors are downright appalling:

• Threats of jail time: Some debtors have reportedly been threatened with arrest—even with arrest at their place of employment.
• Insults: Sources indicate that some collectors have taken to belittling debtors about their level of education and their work ethic.
• Cruel suggestions: Apparently, some debt collectors have gone so far as to suggest debtors commit suicide as a way to remedy their inability to repay their debts.
• Neighbor contacts: It seems some collectors have even ducked as low as contacting a person’s neighbors about debts owed.

Clearly, something is wrong here. Debt collectors are not legally allowed to get away with such actions, but unfortunately many consumers aren’t aware that they have rights protected by federal law.

Your Rights and Options

So what exactly are creditors forbidden from doing? Here’s a summary of what actions are prohibited by the Fair Debt Collection Practices Act:

• Harassing a debtor, her family or her friends
• Failing to follow up a phone call with written details about a debt within five days
• Contacting anyone besides the debtor or his lawyer about a debt
• Physically or verbally threatening a debtor
• Suggesting or implying that a debtor can be arrested when she legally cannot
• Lying about the amount of the debt owed
• Contacting the debtor directly when he has known legal representation
• Ignoring a debtor’s written denial of a debt

The collectors mentioned in the story above were breaking the law—but unless the debtors are aware of the laws protecting them, they’re not likely to take any action.

Halt Creditors with the Automatic Stay

If you’re facing aggressive behavior from a creditor, it may be time to consider working with a legal professional. One option for stopping creditor contacts is filing for bankruptcy, which will trigger an automatic stay that blocks all contact from creditors.

Additional Resources

Fair Debt Collection Practices Act (PDF)

Posted in Bankruptcy and the Economy, Creditor Harassment, Creditors, collectors | Comments Off

Debtor Collects from Creditor Harassment

Anyone who has ever been hounded by a debt collector has probably fantasized about giving the collector a taste of his or her own medicine. That fantasy may be much easier to realize than most people imagine, as the story of a Dallas debtor shows.

Background: Your Rights as a Consumer

Laws are in place at both the federal and the state level to protect all Americans from overly aggressive debt collection practices. In fact, between the Fair Debt Collection Practices Act, the Fair Credit Reporting Act and the Telephone Consumer Protection Act, a lot of behaviors typical of debt collectors are prohibited.

In addition to other things, debt collectors cannot:

• Lie about their ability to take legal action to collect on a debt
• Call you repeatedly with intent to annoy or harass
• Call you outside of 8 am and 9 pm local time
• Contact you directly when you have indicated that you have legal representation
• Contact you by any embarrassing media (like postcards)

Unfortunately, many consumers are not aware of their rights and so do not take legal action against collectors who break these laws.

A Man with a Plan

According to the Dallas Observer, a man named Craig Cunningham has taken it upon himself to stand up for his consumer rights.

The Observer reports that Cunningham made some poor investment choices when credit was easy and ended up with more than $100,000 worth of debt. But, when collectors began contacting him and asking him to pay up, he decided to fight back.

Essentially, here’s how Cunningham has managed to make the most out of a bad situation:

• He hired a lawyer to represent him and help him understand the intricacies of the consumer protection laws that were relevant to his case.
• He began recording calls from his creditors and saving all forms of contact he received.
• With the help of his attorney, he filed lawsuits whenever a debt collector violated a national or state consumer protection law.
• He began receiving court settlements from successful cases.

Most collection agencies, it seems, prefer out-of-court settlements (which often involve a statutory fine) to taking a case to trial, since settlements save them money. The Observer notes that Cunningham has thus far earned $20,000 from suits against law-breaking collectors.

If you think your rights have been violated by a debt collector, consider contacting an attorney to determine whether you could take steps to receive compensation for the violations.

Additional Resources

Fair Debt Collection Practices Act (PDF)

Posted in Creditors, Financial Literacy, consumer rights, debt collectors | Comments Off

FTC Hails Victory Over Abusive Debt Collection Practices

The Federal Trade Commission announced this month that it has settled charges with three debt collectors accused of various types of abusive debt collection. The settlement, which reportedly includes the largest civil penalty ever levied on a debt collection agency, comes in conjunction with future restrictions for the defendants.

Fair Debt Collection Practices Violated

According to the case, the defendants violated terms of the Fair Debt Collection Practices Act, which outlines acceptable behavior for agencies responsible for collecting on debts. These guidelines prohibit a variety of actions, including:

• Contacting a debtor before 8:00 am or after 9:00 pm local time
• Contacting a debtor after receiving a written request not to do so
• Contacting a debtor at her place of work after being told not to
• Calling the debtor with the intent to annoy, harass or abuse
• Contacting the debtor directly when he is known to have an attorney
• Misrepresenting a debt or using deceit to collect money
• Threatening arrest or legal action when neither is an option
• Seeking more than a person legally owes
• Publishing a person’s name on a “bad debt” list
• Reporting information incorrectly to a credit reporting bureau
• Contacting a third party about a consumer’s debt
• Contacting a debtor by embarrassing media (like a post card)

In this case, the men were charged with threatening arrest and legal action when none was warranted as well as using harassment and abusive contact to collect debts. The men in question were senior managers at debt collection agencies and as such either participated in the illegal actions or were responsible for such actions among their employees.

The Settlements

One of the three defendants, Keith Dickstein, owner of Academy Collection Service, Inc., apparently paid a $2.25 million settlement in 2008. The two defendants who settled early this year, Edward S. Bastian and Edward Hurt, were saddled with fines of $375,000 and $300,000 respectively for abusive collection practices.

The fines were suspended after each man paid $7,500, based on their ability to pay; payment of the remainder will depend upon their future compliance with debt collection laws.

Your Consumer Rights

Federal law outlines many protections for consumers. Make sure you have an idea of what consumer rights you have so you can take legal action, if necessary, should they be violated.

Additional Resources

Fair Debt Collection Practices Act (PDF)

Posted in Creditors, FTC, Financial Literacy, debt collection | Comments Off