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My father recently passed away and had some considerable amount of debt on his credit cards. House and credit card were in the deceased’s name only. The state that is happening in is New Jersey.

In terms of monetary assets, he doesn't have any.

Right now, the credit card company is asking us to pay off his debt, otherwise it will go to his estate. They said they'll reduce amount owed if I pay it, but it wasn't by very much.

At the moment, my mother and I live in the house and I am looking to put the house under my name.

Do I pay off his debt?

Does putting the house under my name change anything?

Kevin
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    State is important and this probably should be moved to law.stackexchange. – Pete B. Aug 29 '17 at 14:16
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    "otherwise it will go to his estate" - it went to his estate when he passed. This sounds like a ploy from a collector trying to scare you into paying before the probate court takes over. – D Stanley Aug 29 '17 at 14:24
  • As other say, it is location specific. Here if the debt was larger than the estate, I could repudiate the inheritance. Nonetheless, while I lived in the house, with laws similar to tenants laws, while technically i did not own the house, they could not also evict me. – Rui F Ribeiro Aug 29 '17 at 17:39
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    We're sorry for your loss. – 8protons Aug 29 '17 at 20:49
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    was the house in his name, or his and your mother's name? if both, then she likely becomes the new sole owner upon his death. if only his, you will likely need to sell the house at a fair value (possibly to yourself) to pay his legal debts. if just in his name, you will need to probate and get an executor to sell the house at fair value. – simpleuser Aug 29 '17 at 21:28
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    I've had a bit of experience with debt collectors in an estate situation. Facts mean nothing to them. They'll say anything they legally can to get money. They're also apparently deaf--I told them where to file with the estate. None did--and ended up getting $0 because of it. (The places that listened filed with the court rather than going to collections in the first place.) – Loren Pechtel Aug 29 '17 at 22:11
  • What does "They said they'll reduce amount owed if I pay it, but it wasn't by very much." mean? – d-b Aug 30 '17 at 07:23
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    @peteb. (Actually regarding migration): migration is a last resort for blatantly offtopic questions. The question at hand is not offtopic. OP should not cross post, but by coming here we can assume wants a financial point of view rather than a legalese one. As you did in your accepted answer. – Mindwin Remember Monica Aug 30 '17 at 13:19
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    @d-b: The deceased might owe $10,000 and the debt collector might agree to accept $5,000 without any effort instead of working hard to get $10,000 with the risk of getting nothing. – gnasher729 Aug 30 '17 at 23:09
  • @gnasher729 Hmm, still don't understand. Doesn't the estate present a final "account" of all the assets and debts before being liquidated? Why doesn't the debt collector wait for that? The interest doesn't stop from adding up, does it? – d-b Aug 31 '17 at 06:28
  • @d-b: Presumably because if the estate only has $100 of assets then they are not going to get any more than $100. However if the OP paid them $5000 then they get $5000. Seems like a good reason to try to sidestep the process. – Chris Aug 31 '17 at 10:23
  • @Chris I think a house is worth more than $100. – jiggunjer Sep 01 '17 at 07:58
  • @Chris Your answer makes the whole thing even weirder. Since you don't inherit debt, why would anyone pay their parents debt? The only reason I can see for this setup is that it will take years to liquidate the estate, and it without doubt could pay this debt, but the collector needs the money NOW. But that sounds very unlikely, doesn't it? – d-b Sep 01 '17 at 11:22
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    You have absolutely no legal obligation to pay it. It was his debt, not yours. With that said, as others have pointed out, his estate may be liable to pay it (I don't remember the exact details of the law here). – EJoshuaS - Stand with Ukraine Sep 01 '17 at 15:22
  • How did the credit card company or collector even find out that he passed away or find your contact information to contact you? Usually they're incompetent at this sort of thing. If you contacted them to tell them, you really screwed up - probably could have finalized everything with the estate before they even noticed. (I see nothing morally wrong with this; ending up with lots of debt they can't collect on is built into their predatory business model & the massive interest & fees they collect.) – R.. GitHub STOP HELPING ICE Sep 01 '17 at 17:38
  • They are asking you to pay because they are unsure they can get payment from the estate. Get a lawyer before you do anything – Stevetech Sep 03 '17 at 15:33

8 Answers8

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Don't pay it, see a lawyer. Given your comment, it will depend on the jurisdiction on the passing of the house and the presence of a will or lack thereof. In some states all the assets will be inherited by your mom. Debts cannot be inherited; however, assets can be made to stand for debts.

This is a tricky situation that is state dependent.

In the end, with few assets and large credit card debt, the credit card companies are often left without payment. I would not pay the debt unless your lawyer specifically told you to do so.

Sorry for your loss.

Pete B.
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    I'm going through the estate process for a parent and the probate attorney we hired indicated that, in our state, some consumer debts cannot be claimed even against the estate. So not only is it the case that user does not have to pay those debts, but, depending on where they live, it could be that even the estate doesn't have to. – Guest5 Aug 29 '17 at 14:38
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    @Guest5 great info! All I can say is to get a will people! Also encourage your loved ones to do the same. – Pete B. Aug 29 '17 at 16:27
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    "unless a lawyer specifically told me to do so" — unless your lawyer specifically told you to. Demands from lawyers representing the other party aren't usually in your interest. – Bob Aug 30 '17 at 04:53
  • Aren't married couples financially liable? I find it strange his wife isn't liable for a debt incurred while married. – jiggunjer Sep 01 '17 at 08:02
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    @jiggunjer That probably varies from place to place – mattumotu Sep 01 '17 at 11:18
  • @mattumotu It seems morally strange to me that there would be any places where somebody would be automatically liable for transgressions of a spouse (but I don't doubt that such places exist - if this site has told me anything it's that the finance world is sometimes crazy). – xLeitix May 15 '19 at 14:57
  • @xLeitix joint bank account with overdraft then they could run up debts in your name? If you have joint assets then they can probably be seized to settle the other persons debts (i.e joint savings, if you have 50/50 in a house then maybe they could only go after 50 of the current value but will vary massively depending on location). If you don't have join assets then I would tend to agree with you. (but I would consider a marriage with no joint assets either new or odd/unusual) – mattumotu May 16 '19 at 11:00
  • @mattumotu Joined assets are a different story than a spouse being automatically liable for any random credit card debt (which is how I read the original response). – xLeitix May 16 '19 at 11:22
  • @xLeitix fair enough, although this case seems to be talking about inheritance, in which case, in many or most jurisdictions, the deceased creditors would have a claim on the estate. – mattumotu May 16 '19 at 11:53
  • @xLeitix Was typing my previous response and re-read the original comment I was replying to. I think I misunderstood your comment. I agree the idea a spouse can be liable for the others debts (ignoring joint assets etc) sounds absurd to me. I think there is/was a communication issue here as that isn't what I was trying to imply (I assume, it was 1.5 years ago, but seems unlikely my opinions would change so drastically in that time) – mattumotu May 16 '19 at 11:56
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First, when a debt collector says, "It's to your advantage to give me money now", I'd take that with a grain of salt. My ex-wife declared bankruptcy and when debt collectors couldn't find her, they somehow tracked me down and told me that I should tell her that it would be to her advantage to pay off this debt before the bankruptcy went through. That was total nonsense of course. The whole point of bankruptcy is to not have to pay the debt. Why would you pay it just before it was wiped off the books? (Now that I think of it, I'm surprised that they didn't tell me that I should pay her debts.)

As others have noted, this would be controlled by state law. But in general, when someone dies any debts are payed from the assets of the estate, and then whatever is left goes to the heirs. If nothing is left or the debts exceed the assets, then the heirs get nothing, but they don't have to pay somebody else's debts.

I don't see how you could "put the house under your name". If he left the house to you in his will, then after any debts are settled in accordance with state law, the house would transfer to you. But you can't just decide to put the house in your name outside of the legal inheritance process. If you could, then people could undermine a will at any time by just deciding to take an asset left to someone else and "put it in their name". Or as in this case, people could undermine the rights of creditors by transferring all assets to themselves before debts were paid. Even if there's some provision in your state for changing the name on a deed prior to probate to facilitate getting mortgages and taxes paid or whatever, I would be quite surprised if this allowed you to shelter assets from legitimate creditors. It would be a gaping loophole in inheritance law.

Frankly, if your father's debts are more than the value of his assets, including the value of the house, I suspect you will not be able to keep the house. It will be sold to pay off the creditors. I would certainly talk to a lawyer about this as there might be some provision in the law that you can take advantage of. I'll gladly yield on this point to anyone with specific knowledge of New Jersey inheritance law.

Jay
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    +1 for the opening line. the text in the quotes can be anything. Anithing a debt collector says should be taken with a grain of salt, should not be agreed upon without consulting expert help (lawyer and/or accountant). There are regulations in place as to what they can do, but general anecdote stands that debt collectors are untrustworthy. – Mindwin Remember Monica Aug 29 '17 at 17:21
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    One usually can disclaim the inheritance altogether. It's way faster and sometimes cheaper, if value of debts is very close to value of the estate, because you avoid lawyer fees. – Agent_L Aug 30 '17 at 15:22
  • "people could undermine a will at any time by just deciding to take an asset" ... you'd be surprised how often things go missing when relatives come to 'clean' the house. – jiggunjer Sep 01 '17 at 08:04
  • @jiggunjer Well, yes. A woman I know once matter-of-factly told me that she and her brother had their mother committed to a nursing home so they could take her house and car and whatever without having to wait for her to die. But I don't expect the law to be on the side of the looters. – Jay Sep 01 '17 at 16:18
  • This answer is especially great because it helps so many more future visitors (the hallmark of a great answer.) – corsiKa Sep 05 '17 at 02:27
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Debts do not inherit to the children. You are absolutely not liable for your parent's debt, in any way whatsoever. ** Collection agents will lie about this; tricking you is their job, and your job is to tell them Heck no, do I look like an idiot?

The Estate

When a person dies, all their personal assets (and debts) go to a fictitious entity called the Estate. This is a holder for the person's assets until they can be dispositioned finally.

The estate is managed by a living person, sometimes a company (law firm), called an Executor. Similar to a corporation which is shutting down business, the Executor's job is to act on behalf of the Estate, and in the Estate's best interest (not his own). For instance he can't decide, in his capacity as executor, to give all the estate's money to himself. He has to loyally and selflessly follow state law and any living-trust or wills that may be in place. This role is not for everyone.

You can't just decide "la la la, I'm going to live in their house now", that is squatting. The house is an asset and someone inherited that, as dictated by will, trust or state law. That has to be worked out legally. Once they inherit the house, you have to negotiate with them about living there.

If you want to live there now, negotiate to rent the house from the estate. This is an efficient way to funnel money into the estate for what I discuss later.**

Debts of the Estate

The Estate has assets, and it has debts. Some debts extinguish on the death of the natural person, e.g. student loans, depending on the contract and state law.

Did you know corporations are considered a "person"? (that's what Citizens United was all about.) So are estates - both are fictitious persons. The executor can act like a person in that sense.

Unsecured debt

If you have unsecured debt, how can a creditor motivate you to pay? They can annoy and harass you. They can burn your credit rating. Or they can sue you and try to take your assets - but suing is also expensive for them. This is not widely understood, but anyone at any time can go to their creditors and say

"Hey creditor, I'm not gonna pay you $10,000. Tough buffaloes. You can sue me, good luck with that. Or, I'll make you a deal. I'll offer you $2000 to settle this debt. What say you?

And you'll get one of two answers. Either "OK" or "Nice try, let's try $7000." If the latter, you start into the cycle of haggling, "3000." "6000." "4000." "5000. "Split the difference, $4500." "OK." This is always a one-time, lump sum, one-shot payoff, never partial payments. Creditors will try to convince you to make partial payments. Don't do it.

Anyone can do that at any time. Why don't living people do this every day?

  • The creditor won't loan you any more money if you do
  • It will burn your credit rating, so neither will anyone else
  • It's immoral

How about an Estate? Estates are fictitious persons, they don't have a "morality", they have a fiduciary duty. Do they plan on borrowing any more money? Nope. Their credit rating is already 0. They owe no loyalty to USBank. Actually, the executor's fiduciary duty is to get the most possible money for the assets, and settle the debts for the least.

So I argue it's unethical to fail to haggle down this debt. If an executor is "not a haggler" or has a moral issue with shortchanging creditors, he is shortchanging the heirs, and he can be sued for that personally - because he has a fiduciary duty to the heirs, not Chase Bank. Like I say, the job is not for everyone.

The estate should also make sure to check the paperwork for any other way to escape the debt: does it extinguish on death? Is the debt time-barred? Can they really prove it's valid? Etc. It's not personal, it's business.

The estate should not make monthly payments (no credit rating to protect) and should not pay one dime to a creditor except for a one-shot final settlement.

Is it secured debt? Let them take the asset. (unless an heir really wants it).

Estate must still be settled

When a person dies with a lot of unsecured debt, it's often the case that they don't have a lot of cash lying around. The estate must sell off assets to raise the cash to settle with the creditors. Now here's where things get ugly with the house.

** The estate should try to raise money any other way, but it may have to sell the house to pay the creditors. For the people who would otherwise inherit the house, it may be in their best interest to pay off that debt.

Check with lawyers in your area, but it may also be possible for the estate to take a mortgage on the house, use the mortgage cash to pay off the estate's debts (still haggle!), and then bequeath the house-and-mortgage to the heirs. The mortgage lender would have to be on-board with all of this. Then, the heirs would owe the mortgage.

Good chance it would be a small mortgage on a big equity, e.g. a $20,000 mortgage on a $100,000 house. Banks love those.

Harper - Reinstate Monica
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  • Although the executor owes a fiduciary duty to the estate, I don't believe that the duty extends to being required to negotiate a debt. I think it is a permissible activity, but not a required one. I think the only time that they would have that duty would be in the event that the debt claim was dubious. It's probably worthwhile for an individual that is performing as an executor to attempt this. If the executor is an attorney whose time costs $200 / hour or more, attempting to negotiate a debt might result in a higher cost (the debt + attorney time) to the estate instead of a lower one. – Itsme2003 Aug 31 '17 at 16:27
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    @Itsme2003 i was riling up to disagree with you, but you took most of the wind out of my sails with the financially reasonable argument. I am still glad I banged the drum hard, however, because the usual reason people pay unnecessarily is fear/reluctance to haggle or disbelief that you can haggle. Preying on that reluctance is what collections is all about. – Harper - Reinstate Monica Aug 31 '17 at 19:18
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    "It's immoral" - Perhaps so with the initial creditor, but once they've sold you to collections all bets are off. Nothing you pay to a collection agency will make the original creditor whole. – Aaron McMillin Sep 01 '17 at 16:03
  • If someone said "tough buffaloes" in the process of defaulting on a debt they owed me I'd hunt them down even if it was the last thing I ever did. – whatsisname Sep 01 '17 at 22:21
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    @whatsisname it'd certainly be the last lending you ever did. Nobody can afford to take collections personally, the stress will kill you. – Harper - Reinstate Monica Sep 01 '17 at 22:51
  • Do you know any good introducing book about this and alike topics? Or just googling books about personal financial? – Ooker Sep 02 '17 at 16:31
  • @ooker Nolo Press is pretty much my go-to for this kind of thing. – Harper - Reinstate Monica Sep 02 '17 at 16:39
  • @AaronMcMillin While it won't make a creditor whole I would still consider my obligation. Even if in sense of Kant's categorical imperative (or rules utilitarianism or bunch of other related ethical concepts) that if we won't pay collectors the collection will bankrupt and the initial creditors won't be likely to made partially whole in future. Or more likely they will need to factor it in the interest and cut off more risky customers. – Maja Piechotka Sep 03 '17 at 00:40
  • I recently married. Not long after we got notice from a court that she was being sued for an old debt of $6,000. Without getting into details, she did indeed sign a contract for their services but was very unhappy with what they provided. I've never tried to haggle over a debt before, but in this case I called the company, told them she was dissatisfied, and said that we didn't really want to have to hire a lawyer to fight over $6,000 to I offered them $2,000 to settle. I was frankly surprised that they promptly agreed. – Jay Feb 27 '19 at 17:04
  • @Harper Taking anything too personally can kill you. Years ago I heard the advice, "Don't hold a grudge. Because while you're at home sitting in a corner nursing the grudge and feeling miserable, they're out dancing." – Jay Feb 27 '19 at 17:08
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Sorry for your loss.

Like others have said Debts cannot be inherited period (in the US). However, assets sometimes can be made to stand for debts.

In most cases, credit card debt has no collateral and thus the credit card companies will often either sell the debt to a debt collector or collections agency, sue you for it, or write it off. Collecting often takes a lot of time and money, thus usually the credit card companies just sell the debt, to a debt collector who tries to get you to pay up before the statute of limitations runs out. That said, some credit card companies will sue the debtor to obtain a judgement, but many don't. In your case, I wouldn't tell them of your loss, let em do their homework, and waste time. Don't give them any info,and consult with a lawyer regarding your father's estate and whether his credit card will even matter.

Often, unscrupulous debt collectors will say illegal things (per the FDCPA) to pressure anyone related to the debtor to pay. Don't cave in. Make sure you know your rights, and record all interactions/calls you have with them. You can sue them back for any FDCPA infractions, some attorneys might even take up such a case on contingency, i.e they get a portion of the FDCPA damages you collect. Don't pay even a penny. This often will extend or reset the statute of limitations time for the debt to be collectable. i.e Ex: If in your state, the statute of limitations for credit card debt is 3 years, and you pay them $0.01 on year 2, you just bought them 3 more years to be able to collect.

TL;DR: IANAL, most credit card debt has no collateral so don't pay or give any info to the debt collectors. Anytime you pay it extends the statute of limitations. Consult an attorney for the estate matters, and if the debt collectors get too aggressive, and record their calls, and sue them back!

unknownprotocol
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    Martin, that statement is 100% true in the USA, and since the question is tagged USA my answer reflects that. It's a given that other countries with different laws might do things different. – unknownprotocol Aug 30 '17 at 14:26
  • "In the USA" - yes (did you check Lousiana? As I understand it, they have a much more civil law system there). But relying on the tags to limit the scope of an absolute like that is unwise. If you had said "in New Jersey", I would have had no quibble. – Martin Bonner supports Monica Aug 30 '17 at 14:34
  • At first I thought "estatute" was a typo, but it appears every time it seems that "statute" should appear. Is there some kind of electronic statute I'm not aware of, or what is the meaning of this word? –  Aug 30 '17 at 17:14
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    @Michael haha touché! Forgive my French, monsieur. – unknownprotocol Aug 31 '17 at 01:19
  • I don't believe a non-owing third party can extend the statue of limitations on someone else's debt. If that were possible, collectors would use proxies/sockpuppets to freshen debts that would otherwise expire. – Harper - Reinstate Monica Aug 31 '17 at 01:29
  • @Harper hmm that's an interesting point, again IANAL, but IMO the safest course of action is to not pay or acknowledge the debt at all. Whether a related 3rd party's payment counts all depends on the laws of the state and how unscrupulous the debt collectors/agency are. I've had collectors call me saying "all son's inherit their father's debts, and if you don't pay us at least X, we'll take you to court/jail otherwise" and they went as far as try to garnish a checking account I owned (not my father, but we share the similar name) so I'd still play it safe. – unknownprotocol Aug 31 '17 at 01:44
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    "Debts cannot be inherited period" is unequivocally false. There are many states that have "Filial responsibility laws" https://en.wikipedia.org/wiki/Filial_responsibility_laws – Sam Aug 31 '17 at 15:43
  • @Sam - Filial responsibility laws seem to impart an obligation to provide essential (food, clothing, shelter) support to living, impoverished close relatives. I don't see how that translates to paying debts of dead relatives, especially if they weren't impoverished. –  Aug 31 '17 at 23:02
  • @hatchet " Should the children fail to provide adequately, they allow nursing homes and government agencies to bring legal action to recover the cost of caring for the parents" – Sam Aug 31 '17 at 23:12
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    @Sam that's a debt of the children, not of the parents, since it's the children who have the obligation. – André Paramés Sep 01 '17 at 16:48
  • @AndréParamés, No. It's a debt of the parent. The parent is the one that chose the service, signed the paperwork and received the service. The child is in no way involved in the debt or the services that made it happen until the parent's death. – Sam Sep 01 '17 at 17:31
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First off, very sorry for your loss. I lost my father a few years ago and I know it can be tough.

My father also had a lot of credit card debt. They attempted to collect the debt from my mother, who was no longer on the account (for over a decade). It was just an attempt to recoup as much money as they could before dealing with a probate court.

As others have said, it depends on your state law. You will want to talk to a lawyer, figure out who is going to be the executor of the estate, and determine the next steps in starting to settle debts that your father had. If you want to take possession of the house, then you will likely need to work with the executor and perhaps purchase the house from the estate (which would then use the money to pay off debts).

curt1893
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Sorry for your loss. I am not a lawyer and this isn;t legal advice -- which I am not licensed to give. But I've had to deal with some debt situations of my own. I think the worst case scenario is the creditor can get a judgment, but that won't be against you unless you were a co-signor. The collectors are going to prey on your decency to make you feel like you should pay it, but you are under no legal obligation to do so.

If they file in court and then win a judgment, they may be able to collect on the assets of the estate. You mention no money but you mention a house. That is an asset with value, and putting it in your name isn't going to do much. You should see a lawyer on this, because it seems logical that they could collect on the value of the house at the time of the death, and even if it was willed to you it can still be attacked to pay the debt.

Here is a good write-up on NJ death and debt and whether it can be inherited by the adult children:

https://www.atrbklaw.com/bankruptcy-resources/83-articles/103-can-you-inherit-your-dead-parent-s-debts

Thomas Carlisle
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You also might want to see what sort of documentation the credit card company has. Companies can get pretty lazy sometimes about recordkeeping; there have been cases where banks tried to foreclose on a property but weren't able to produce documents establishing the mortgage. With your father dead, is there anything other than the credit card company's word that the debt is valid?

Acccumulation
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First, if it is in any way a joint account, the debt usually goes to the surviving person. Assets in joint accounts usually have their own instructions on how to disperse the assets; for example, full joint bank accounts usually immediately go to the other name on the account and never become part of the estate. Non-cash assets will likely need to be converted to cash and a fair market valuation shown to the probate court, unless the debts can be paid without using them and they can be transferred to next of kin. If, after that, the deceased has any assets at all, there is usually (varies by state) a legally defined order in which debtor types must be paid. This is handled by probating the estate. There is a period during which you publish a death notice and then wait for debt claims and bills to arrive. Then pay as many as possible based on the priority, and inform the others the holder is deceased and the estate is empty. This sometimes needs to be approved by a judge if the assets are less than the debts. Then disperse remaining assets to next of kin. If there are no assets held by just the deceased, as you get bills you just send a certified copy of the death certificate, tell them there is no estate, then forget about them. A lawyer can really help in determining which need to be paid and to work through probate, which is not simple or cheap. But also note that you can negotiate and sometimes get them to accept less, if there are assets. When my mother died, the doctors treating her zeroed her accounts; the hospitals accepted a much reduced total, but the credit cards wanted 100%.

simpleuser
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