When my father died of cancer in October 2018 – in a small California town called Loma Linda – we received a huge ICU bill in his name exactly one week after his death. He had been admitted to the ICU for 13 days after suffering from colon cancer for nearly two years.
My family was still sorting out the expensive logistics of bringing his body back to our homeland of Malawi, and the bill seemed unreal. It might as well have been Monopoly money, the implied stacks of banknotes seemed so real. My mother and I laughed bitterly as we sat together at the dinner table, appalled at the absurdity of essentially being billed for my father’s death.
The nearly 10 pages of hospital statements detailing the technicalities of the last 13 days of my father’s life made me realize the daunting amount of knowledge I had about the financial affairs — especially debts — of the recently deceased. I was even naive enough to not know that someone could still receive medical bills after they died. This seemed ridiculous, but is an absolute truth about the financial realities of death in America.
So in the months following my father’s funeral, information and research became twin weapons. I knew it would be easy to take financial advantage of my family during this emotionally sensitive time, and I was determined to make sure that didn’t happen. Since I was the only member of my family still living in the United States, I spent several arduous months making phone calls myself and mailing copies of my father’s death certificate while I handled his American financial affairs.
In the nearly five years since my father’s death, I’ve heard frustrating and heartbreaking stories of how grieving families have not only lost out financially after the death of a loved one, but have also been taken advantage of by unscrupulous companies looking to maximize their profits with a thin disregard for ethics and legality. Here are the top five things I think people should know about what they most likely owe (or don’t owe) their debtors after the death of a loved one.
1. Debts don’t disappear, but that doesn’t necessarily mean someone has to pay them
According to the Consumer Financial Protection Bureau, a person’s debts are taken over by their estate — which is simply the money and property left over after their death — and any outstanding debts should be paid off with what’s left of the person’s estate. This is done either by the executor named in the deceased person’s will or by a state-appointed administrator if the person died without a will.
In very few cases, someone else — such as a spouse or parent — may be obligated to pay certain debts of the deceased. For example, in community property states — where spouses share certain debts incurred during their marriage — a surviving spouse may be obligated to pay certain debts. Check state-specific requirements to make sure only the amount legally owed is paid.
2. Unsecured debts remain the property of the deceased
Unsecured debt includes most credit card debt, student loans, personal loans and medical bills. According to Experian, these should be paid off from the estate if there is money left to pay them off.
Even then, whether those debts will be paid depends on the legal order in which estate payments must be handled. For example, if a person dies in a state where survivors are paid first, there may not be any money left in the estate to pay off unsecured debts. Make sure the executor or administrator confirms the specific state requirements before making any payments.
3. Secured debts must be repaid by someone
The most common secured loans are mortgages and car loans. If they are not repaid by the estate or someone else, the lending institution can claim the asset used as collateral – the house or car. With houses and cars, there are often co-signers on loans, so it is important to know who is responsible for these debts and what will happen, especially if they are to be used after the loved one dies.
4. State student loans are forgiven – private student loans are usually not
If you die with federal student loan debt, those loans will be forgiven. However, private lenders may still require the loan to be repaid—particularly in the case of certain parental student loans or other types of co-signed student loans. The executor of the estate should contact the lending institution directly to find out what applies.
5. The law restricts the collection of debts after death
Unfortunately, because of their emotional vulnerability, the bereaved can become ideal targets for aggressive debt collectors who want to pay off the deceased’s debts by any means necessary. The Federal Trade Commission provides detailed information on what debt collectors can and cannot do to collect debts after the death of a loved one. This is particularly intended to protect against manipulative and potentially fraudulent practices aimed at loved ones who are willing to do whatever they believe is necessary to pay off a debt.
Dealing with a loved one’s debts after their death can be daunting and even re-traumatizing. After my father’s death, I realized how bureaucratically difficult it is to legally justify the biological death of a loved one – especially with regard to their debts.
My father’s ICU bill was finally written off after several letters and phone calls between me and the hospital billing office. The last letters I wrote to the hospital were to all of their various medical teams, thanking them for their care during the worst 13 days of my life and that of my family. This allowed the emotional process of moving on to finally begin.
This article was originally published in May 2023.
