Credit card companies forgiving debt after death?

[SWBoarder]

This month I created a financial action plan for someone after a husband’s death. He died with 8 credit cards with $30K total balances plus medical bills. The wife has a house with $20K in equity, a car with a big loan, a mortuary bill, and $40K in retirement assets. The husband had a truck and boat. We were able to transfer the titles to the wife (an advantage of living in small town) and she has people selling them to generate cash.

The Discover card had a $15K balance but we found it had a payment protection plan (costing about 10% of the balance annually) which will cause the loan to be forgiven. Maybe the only instance in history where one of these overpriced plans was beneficial?

I had her pricing a credit card consolidation and a second mortgage. I was trying to think outside the box but I did not see how she was not liable for all his bills. She lives in Washington, a community property state, and bank officials and a lawyer said she was responsible for his bills whether or not they were in her name. I pulled credit reports on them and her name was on 2 of the cards.

I sat her down and had her call people they owed money. When she called the medical offices … they forgave the bills with a death certificate. A hospital transferred her to the charity care program and may forgive the bills. Then she sat down and called each credit card company getting transferred to the probate office. Six said they will forgive the debt (including one where she was ON THE BILL) and the other two said they will get back to her with their decision.

She would not consider herself "lucky" since she lost the love of her life, but really, do credit cards ever do this?? I thought they pursued you or your family and if unsuccessful, sold the debt to a collection agency that took up the battle.

[DTSC]

I have heard one widow tell me that Chase forgave her late husband's debts ~$15,000 after speaking with her about it and ***without her specifically requesting that the debt be forgiven***. She told me that if she had know they would forgive the debt, she would have charged his funeral on the card. I don't know if this is state-specific; she lives in Illinois.

[Chuck]

She told me that if she had know they would forgive the debt, she would have charged his funeral on the card.

My guess is they would only cancel balances from before the actual time of death.

[oxothuk]

She told me that if she had know they would forgive the debt, she would have charged his funeral on the card.

My guess is they would only cancel balances from before the actual time of death.

Using the credit card after death would be fraud.

[DTSC]

She told me that if she had know they would forgive the debt, she would have charged his funeral on the card.

My guess is they would only cancel balances from before the actual time of death.

Using the credit card after death would be fraud.

I suppose he could have arranged and paid for his funeral before dying - he died from a slow chronic illness.

[mega317]

She told me that if she had know they would forgive the debt, she would have charged his funeral on the card.

My guess is they would only cancel balances from before the actual time of death.

But that's a pretty funny thing for her to say.

OP: Just by a quick googling looks like AUs are usually not on the hook. Is there something actionable to this thread?

[Tallis]

Another datapoint. When I settled my brother's estate, he had several small credit card balances ($100-$300). While I held off payment, waiting for other creditors to appear, a couple of the credit card companies offered to settle the bills for 50% of the balance.

[theplayer11]

from my experience, cc companies did forgive some %. It varied, but they all forgave.

[jebmke]

My wife's aunt died with no money and some credit card debt. The card companies wrote it off without pushing back.

[mouses]

I am baffled and pleased at this niceness from companies that I do not generally think of as nice.

[Carefreeap]

My mother owed about $60k in cc debt over three cards. Entire estate was upside down by about $400k.

Her CU wrote off the debt (I also did a voluntary repo of her car which was financed by the same CU). They wrote-off the debt and issued 1099s to the estate. The debt was not "forgiven".

Despite letters with the other two ccs they turned the accounts over to collection agencies. I sent multiple copies of the original letter including the death certificate but they kept reselling the debt. I think it took over a year for them to stop contacting me.

It's a really crappy thing to do to the ones you leave behind.

[Carefreeap]

I am baffled and pleased at this niceness from companies that I do not generally think of as nice.

It's a cost benefit thing for them. Far more lucrative to get new business than pursue doubtful debt.

[mptfan]

In most cases, credit card debt dies with the person, and no one else is responsible, including spouses.

http://www.early-retirement.org/forums/ ... 26181.html

[DTSC]

She told me that if she had know they would forgive the debt, she would have charged his funeral on the card.

My guess is they would only cancel balances from before the actual time of death.

But that's a pretty funny thing for her to say.

OP: Just by a quick googling looks like AUs are usually not on the hook. Is there something actionable to this thread?

Sure there's something actionable - if you're dying of cancer, pre-pay your funeral on a credit card!

[letsgobobby]

Credit card companies will routinely make claims against the estate of the deceased. They can sue the estate if there are sufficient assets to pay the debts but the executor opts not to pay them. For small bills they will probably not do that. For larger bills they probably will.

If the estate does not have sufficient assets then they won't waste their time.

How was wife able to 'transfer' truck and boat titles from husband to herself? Typically that occurs after probate, the purpose of probate being a chance to file claims against the estate.

Much of this is depenedent on state law.

[flamesabers]

While it probably depends on the laws of the state, my understanding is unless the credit card account has a surviving joint-owner or co-signer, the most credit card companies can do is file a claim against the deceased's estate. Otherwise credit card companies have no legal recourse to go after the surviving spouse or other family members since none of these individuals signed contractual agreements with the credit card companies.

[mptfan]

Credit card companies will routinely make claims against the estate of the deceased.

Yes, but it is also routine that the deceased does not have an estate, i.e., no probate estate, therefore, nothing against which the credit card companies can make a claim.

[bsteiner]

Credit card companies will routinely make claims against the estate of the deceased. They can sue the estate if there are sufficient assets to pay the debts but the executor opts not to pay them. For small bills they will probably not do that. For larger bills they probably will.

If the estate does not have sufficient assets then they won't waste their time.

How was wife able to 'transfer' truck and boat titles from husband to herself? Typically that occurs after probate, the purpose of probate being a chance to file claims against the estate.

Much of this is depenedent on state law.

Executors are supposed to pay valid claims. Of course, if there are no assets, the executor can't pay them.

In some states, a vehicle is considered an exempt asset, and passes to the spouse by operation of law (in other words, the spouse can take ownership of it without it going through the estate).

[michaeljc70]

I am surprised they do this on sizeable debt (5 figures) without any proof that there aren't any assets. I can understand that $500 or even a couple thousand would not be worth the attorney fees to try and recover.

It sounds like something illegal may have been done with the boat and car.

[Earl Lemongrab]

In my mother's case, she had that death insurance on her credit card and all we had to do was file a claim (actually the banker at BOA did that as part of taking care of transferring POD accounts and such). Had I KNOWN that she had it, we certainly would have put a lot more of her end expenses on it. As it was, it was only a few thousand.

Of the rest of the bills, most said the forget it when they heard that she died. Some my sister just paid, which annoyed me as it was no longer her business, but I reimbursed her anyway. One creditor filed against the estate, which the attorney negotiated to half. We paid her last month's rent on the apartment to make sure that we had minimal hassle getting her stuff out.

[Earl Lemongrab]

Executors are supposed to pay valid claims.

Yes, but what is a "valid claim"? Not just somebody saying there's money owed. My attorney told me not to pay anything unless they filed a claim against the estate. As I mentioned, my sister paid some anyway, and it was worth it on the apartment rent to just pay.

[Carefreeap]

Executors are supposed to pay valid claims.

Yes, but what is a "valid claim"? Not just somebody saying there's money owed. My attorney told me not to pay anything unless they filed a claim against the estate. As I mentioned, my sister paid some anyway, and it was worth it on the apartment rent to just pay.

Because of existing credit card statements?

I think it's wrong to stiff legitimate creditors when the deceased has used the services/received the goods. I would have much preferred to pay my mother's debts than to deal with the financial mess she left. I was stunned by some friends' reactions when they thought it was great that my mother stiffed her lenders. I can only imagine how they would feel had the shoe been on the other foot.

[llama]

Handling the estate of a parent where there was a $1k balance on a Bank of America card, I called BoA to inform them of the death. They mailed me a form to fill out specifying contact information for the executor of the estate (me). The estate had plenty of money to cover the expense, but after dutifully returning the form to BoA, I never heard from them again.

[Silk McCue]

Executors are supposed to pay valid claims.

Yes, but what is a "valid claim"? Not just somebody saying there's money owed. My attorney told me not to pay anything unless they filed a claim against the estate. As I mentioned, my sister paid some anyway, and it was worth it on the apartment rent to just pay.

Because of existing credit card statements?

I think it's wrong to stiff legitimate creditors when the deceased has used the services/received the goods. I would have much preferred to pay my mother's debts than to deal with the financial mess she left. I was stunned by some friends' reactions when they thought it was great that my mother stiffed her lenders. I can only imagine how they would feel had the shoe been on the other foot.

In the probate process it is the creditors obligation upon being notified by the court to file with the court to secure payment. If they don't file, they don't get paid. That isn't stiffing the creditors, it's the law. Credit card companies often won't pursue small amounts because it isn't cost effective and they are already highly profitable lines of business. For my mother-in-law one CC company chose not to file for a $2500 or so debt. Another filed for a $13,000 debt and accepted my offer of 50% without haggling for more. As executor my one and only obligation was to the Estate - not the creditors. They are more than able to take care of themselves and do so with the rates and fees they charge.

[Mudpuppy]

I had her pricing a credit card consolidation and a second mortgage. I was trying to think outside the box but I did not see how she was not liable for all his bills. She lives in Washington, a community property state, and bank officials and a lawyer said she was responsible for his bills whether or not they were in her name. I pulled credit reports on them and her name was on 2 of the cards.

I think you guys need to consult with a better lawyer. His estate is liable for his bills, but it sounds like they had fewer assets than the total bills. Some of those assets may also be sheltered from creditors. Once that money is exhausted, I don't think the creditors can continue pursuing the widow. The estate is then insolvent and the remaining creditors are out of luck.

[Earl Lemongrab]

Executors are supposed to pay valid claims.

Yes, but what is a "valid claim"? Not just somebody saying there's money owed. My attorney told me not to pay anything unless they filed a claim against the estate. As I mentioned, my sister paid some anyway, and it was worth it on the apartment rent to just pay.

Because of existing credit card statements?

I don't understand the question.

I think it's wrong to stiff legitimate creditors when the deceased has used the services/received the goods. I would have much preferred to pay my mother's debts than to deal with the financial mess she left. I was stunned by some friends' reactions when they thought it was great that my mother stiffed her lenders. I can only imagine how they would feel had the shoe been on the other foot.

As executor I was representing the estate, not the creditors. There is a process in place according to state law for filing claims. If they choose not to, that is not a case anyone stiffing them but themselves.

[beehappy]

I'm a bit confused. Credit card debt is unsecured debt. They cannot seize assets if not paid. So what's the upside to paying an unsecured debt of a dead person? Honest question.

[flamesabers]

I'm a bit confused. Credit card debt is unsecured debt. They cannot seize assets if not paid. So what's the upside to paying an unsecured debt of a dead person? Honest question.

I think you're mixing up various terms. Unsecured means there are no assets pledged as collateral in the event the debt is not paid. That doesn't mean the creditor is unable to file a claim against you (or your estate if you're deceased) in the event you have an outstanding balance with the creditor.

If you're the executor of an estate and the courts have ordered you to pay off the estate's credit card debts using the estate's assets, the upside of paying off the unsecured debt is you'll be in compliance with the law. If on the other hand the credit card companies have written off the debt or otherwise not going to pursue legal action to collect the balance against the estate's assets, there wouldn't be an upside to paying the credit card companies.

[michaeljc70]

I'm a bit confused. Credit card debt is unsecured debt. They cannot seize assets if not paid. So what's the upside to paying an unsecured debt of a dead person? Honest question.

I think you're mixing up various terms. Unsecured means there are no assets pledged as collateral in the event the debt is not paid. That doesn't mean the creditor is unable to file a claim against you (or your estate if you're deceased) in the event you have an outstanding balance with the creditor.

If you're the executor of an estate and the courts have ordered you to pay off the estate's credit card debts using the estate's assets, the upside of paying off the unsecured debt is you'll be in compliance with the law. If on the other hand the credit card companies have written off the debt or otherwise not going to pursue legal action to collect the balance against the estate's assets, there wouldn't be an upside to paying the credit card companies.

Exactly.

It is not directly tied to an asset that they can repossess like a home or car. At one time, I have no idea if it is the same now, even a Sears charge card was secured. If you bought a washing machine and didn't make the payments they could repossess it. If you default on unsecured debt, they can go after other assets, but it is legally more difficult. If you miss payments on a car they can show up in the middle of the night and take it without going to court (in most states).

[8foot7]

MIL just died, wife was executor. Close to $20,000 owed to Chase alone. Wife contacted them several times with death notices. Never filed a claim. Estate just closed, all timely filed claims (and a couple of non timely filed claims that came in at last minute) were paid. Chase SOL. I fail to see how it would have cost Chase more than $20,000 to file a claim but I guess they have their reasons.

[michaeljc70]

MIL just died, wife was executor. Close to $20,000 owed to Chase alone. Wife contacted them several times with death notices. Never filed a claim. Estate just closed, all timely filed claims (and a couple of non timely filed claims that came in at last minute) were paid. Chase SOL. I fail to see how it would have cost Chase more than $20,000 to file a claim but I guess they have their reasons.

Any idea how long they get to file their claim? Is it from DOD or when you notify them? I would imagine when they find out as the other wouldn't make much sense.

[NotWhoYouThink]

Part of probate is putting out notices in whatever publications are appropriate in your state that a person has died and creditors have so many days to file a claim. How many days that is depends on the state, but the CC companies should know to check on those things. Claims not filed before the end of that time period don't have to be paid.

If it had been my mom's estate, I would have used estate funds to pay the bills, but it is not legally required without a claim.

[student]

My mother owed about $60k in cc debt over three cards. Entire estate was upside down by about $400k.

Her CU wrote off the debt (I also did a voluntary repo of her car which was financed by the same CU). They wrote-off the debt and issued 1099s to the estate. The debt was not "forgiven".

Despite letters with the other two ccs they turned the accounts over to collection agencies. I sent multiple copies of the original letter including the death certificate but they kept reselling the debt. I think it took over a year for them to stop contacting me.

It's a really crappy thing to do to the ones you leave behind.

I think the CU debt was forgiven. They wrote off the debt. So her estate did not have to pay back the debt. IRS wanted its cut. Think of it this way. A bank wrote of the debt and thus reduced its profit, which reduced the tax owe the government. The government wants its cut under most circumstances. https://www.irs.gov/taxtopics/tc400/tc431

"In general, if you have cancellation of debt income because your debt is canceled, forgiven, or discharged for less than the amount you must pay, the amount of the canceled debt is taxable and you must report the canceled debt on your tax return for the year the cancellation occurs. The canceled debt isn't taxable, however, if the law specifically allows you to exclude it from gross income. These specific exclusions will be discussed later."

[Earl Lemongrab]

If it had been my mom's estate, I would have used estate funds to pay the bills, but it is not legally required without a claim.

If you're the executor for the estate and it has other beneficiaries besides you then you should careful giving away estate money that isn't mandated by the probate court. The heirs could sue you for failing to follow your duty. Again, you represent the estate not the creditors. When I did it, there wasn't even a mechanism to pay anyone except through the probate system. Had I written an unapproved check from the estate account, there would have been a discrepancy when it came time to send checks to the heirs. In my case, I paid some things from the POD accounts, which were really for all of us but in my name only. This was by general agreement of my siblings.

[8foot7]

MIL just died, wife was executor. Close to $20,000 owed to Chase alone. Wife contacted them several times with death notices. Never filed a claim. Estate just closed, all timely filed claims (and a couple of non timely filed claims that came in at last minute) were paid. Chase SOL. I fail to see how it would have cost Chase more than $20,000 to file a claim but I guess they have their reasons.

Any idea how long they get to file their claim? Is it from DOD or when you notify them? I would imagine when they find out as the other wouldn't make much sense.

In our state the newspaper publication had to be run for 90 days. In our case, that period went from May through August. Two claims came in in early September, beyond the deadline, that were otherwise valid and so to avoid a prolonged fight those claims were paid.

[michaeljc70]

MIL just died, wife was executor. Close to $20,000 owed to Chase alone. Wife contacted them several times with death notices. Never filed a claim. Estate just closed, all timely filed claims (and a couple of non timely filed claims that came in at last minute) were paid. Chase SOL. I fail to see how it would have cost Chase more than $20,000 to file a claim but I guess they have their reasons.

Any idea how long they get to file their claim? Is it from DOD or when you notify them? I would imagine when they find out as the other wouldn't make much sense.

In our state the newspaper publication had to be run for 90 days. In our case, that period went from May through August. Two claims came in in early September, beyond the deadline, that were otherwise valid and so to avoid a prolonged fight those claims were paid.

The reason I asked is my Grandfather passed away a couple of months ago. Almost everything was in trust and so no probate. My Father said he didn't publish anything and thought that was only necessary if you went through probate (in IL).

[8foot7]

I think that's probably true that you only publish in probate. What's the point otherwise?

[NotWhoYouThink]

Does probate protect you from claims? If there was no probate, so no notice to creditors, then what stops creditors from trying to collect from the heirs/beneficiaries? Most won't bother, but what stops the debt collectors they sell the debt to?

[djpeteski]

A lot of this is the inability to get 'blood out of a stone'.

She just need not pay the CC bills, at worse they sue her. Big deal, she does not really have assets and I am sure the income is tight. They won't get anything.

They could go after the estate in probate court but the success there with such meager assets is not worth the expense. If there is an award, it will be for pennies on the dollar.

The Credit Card companies are better off focusing their efforts on signing new accounts. Its working, we, as a nation, are in a record amount of debt.

[Broken Man 1999]

I'm a bit confused. Credit card debt is unsecured debt. They cannot seize assets if not paid. So what's the upside to paying an unsecured debt of a dead person? Honest question.

The upside to me would be that I did the proper thing according to my ethics. YMMV.

Broken Man 1999

[michaeljc70]

I think that's probably true that you only publish in probate. What's the point otherwise?

In IL, under $100k you avoid probate. In trust, no probate. So, if you have $90k in assets (or way more in trust) and owe on credit cards, how will they know to try and collect?

[SWBoarder]

How was wife able to 'transfer' truck and boat titles from husband to herself? Typically that occurs after probate, the purpose of probate being a chance to file claims against the estate.

When you are liked in a small town, people help you out. I gave her marching orders to generate cash and selling the truck was the best option. (Not much market for the boat till Spring.) She needs to pay off the mortuary and if possible the car loan as without his pensions she has negative cash flow.

[SWBoarder]

I really learned from this discussion. I had not thought through secured versus unsecured debt. Most of all from searching on the web I had no idea this ever happened and wanted to know if anyone shared this experience.

I looked up probate law in WA and if the estate is worth less than $100K, it is exempt. Since there are no assets in his name, this is one worry the widow won't have.

[diy60]

In my state, state law clearly spells out the executor must act as a fiduciary to protect the assets for the benefit of the heirs. It further specifies the fiduciary is prohibited from paying barred claims (e.g. claims not file in a timely manor). Paying the barred claims would be against state law, and doing so could open you to lawsuits from the heirs.

[quantAndHold]

As executor I was representing the estate, not the creditors. There is a process in place according to state law for filing claims. If they choose not to, that is not a case anyone stiffing them but themselves.

As executor, your first responsibility is to follow the law. The responsibilities of the executor are to pay legitimate claims, in the priority order laid out by the state, and then if anything is left over, to distribute the remainder to the heirs according to the will, or the intestate laws of the state. Your responsibility is to the heirs, but not to the point of breaking the law and stiffing legitimate creditors.

Many small and mid sized estates either have no probate, or an informal probate process, where claims only go through the probate court if they’re in dispute. In a normal small estate, bills are sent directly to the executor, who just holds all the bills until the claim period is over, then stacks them up in priority order, and writes checks until either all the bills are paid, or the money runs out. Any bill that comes in after the claim period is, of course, barred, but it’s the responsibility of the executor to figure out who the prospective creditors are, contact them directly, and give them sufficient time to present claims (the ad in the newspaper is generally not sufficient notice for known creditors).

In the case of my dad’s estate, a couple of the bills that came in during the claim period were questionable (medical bills that the insurance company had refused to pay because they weren’t billable things). There was a form on the state’s probate court website for disputing a claim, so I filled out the form and sent it off to those creditors, and never heard from them again. There were also a couple of bills that came in after the claim period ended. I called them on the phone and told them to lump it. One of them tried to get me to pay out of a sense of guilt, but when I laughed at her and explained my legal responsibilities to the heirs, she went away.

[Earl Lemongrab]

As executor I was representing the estate, not the creditors. There is a process in place according to state law for filing claims. If they choose not to, that is not a case anyone stiffing them but themselves.

As executor, your first responsibility is to follow the law. The responsibilities of the executor are to pay legitimate claims, in the priority order laid out by the state, and then if anything is left over, to distribute the remainder to the heirs according to the will, or the intestate laws of the state. Your responsibility is to the heirs, but not to the point of breaking the law and stiffing legitimate creditors.

Who said anything different? When I speak of representing someone, it's is a given that it's within the law. Why would you assume differently?

The law in Missouri requires them to file with the probate court. Period. If they don't, nobody owes them anything.

[quantAndHold]

As executor I was representing the estate, not the creditors. There is a process in place according to state law for filing claims. If they choose not to, that is not a case anyone stiffing them but themselves.

As executor, your first responsibility is to follow the law. The responsibilities of the executor are to pay legitimate claims, in the priority order laid out by the state, and then if anything is left over, to distribute the remainder to the heirs according to the will, or the intestate laws of the state. Your responsibility is to the heirs, but not to the point of breaking the law and stiffing legitimate creditors.

Who said anything different? When I speak of representing someone, it's is a given that it's within the law. Why would you assume differently?

The law in Missouri requires them to file with the probate court. Period. If they don't, nobody owes them anything.

The requirement to file with the probate court may be true in Missouri. There are many states where that is not true. In particular, I don’t think filing claims with the probate court is required in any of the Uniform Probate Code states. The text of the notices I sent out in Colorado (a UPC State) said to contact either me or the probate court. Not surprisingly, all of the creditors I dealt with contacted me directly.

There are multiple court cases nationwide where the estate got sued (and lost) because they attempted to quietly let the claim period expire without being proactive about notifying individual creditors. So...I don’t assume people know what’s legal and what isn’t.

[8foot7]

As executor I was representing the estate, not the creditors. There is a process in place according to state law for filing claims. If they choose not to, that is not a case anyone stiffing them but themselves.

As executor, your first responsibility is to follow the law. The responsibilities of the executor are to pay legitimate claims, in the priority order laid out by the state, and then if anything is left over, to distribute the remainder to the heirs according to the will, or the intestate laws of the state. Your responsibility is to the heirs, but not to the point of breaking the law and stiffing legitimate creditors.

Many small and mid sized estates either have no probate, or an informal probate process, where claims only go through the probate court if they’re in dispute. In a normal small estate, bills are sent directly to the executor, who just holds all the bills until the claim period is over, then stacks them up in priority order, and writes checks until either all the bills are paid, or the money runs out. Any bill that comes in after the claim period is, of course, barred, but it’s the responsibility of the executor to figure out who the prospective creditors are, contact them directly, and give them sufficient time to present claims (the ad in the newspaper is generally not sufficient notice for known creditors).

In the case of my dad’s estate, a couple of the bills that came in during the claim period were questionable (medical bills that the insurance company had refused to pay because they weren’t billable things). There was a form on the state’s probate court website for disputing a claim, so I filled out the form and sent it off to those creditors, and never heard from them again. There were also a couple of bills that came in after the claim period ended. I called them on the phone and told them to lump it. One of them tried to get me to pay out of a sense of guilt, but when I laughed at her and explained my legal responsibilities to the heirs, she went away.

This is wildly inaccurate advice in a lot of states. Consult a lawyer.

[fposte]

I'm a bit confused. Credit card debt is unsecured debt. They cannot seize assets if not paid. So what's the upside to paying an unsecured debt of a dead person? Honest question.

The upside to me would be that I did the proper thing according to my ethics. YMMV.

Yes, that's how I approached my father's estate. Post-mortem bills were small overall, and his estate didn't get probated, so it wasn't a paperwork hassle. I just wrote a check to Discover and moved on. Not only were the charges legitimate and lawfully incurred, one of them was covering my recent hotel overnight when I visited, so I would have felt particularly scummy trying to slide out of that.