Regulate attempts to collect debts of the dead

[Tab]

Have you lost a relative lately and received a call from someone who says that the deceased, who passed on without settling a debt, would rest easier knowing that the slate had been wiped clean? More companies, among them credit card lenders, banks, finance companies, auto lenders and health care providers, are employing companies that specialize in persuading people to make good on the debts of the dead - though they have no legal obligation to do so.

Last week, the New York Times reported that collecting from the relatives of deceased people has become one of the most successful enterprises in the debt collection industry. Remarkably, relatives of the dead are more likely to pay off a debt than the late debtors once were. Chalk it up to love of the deceased, guilt, the belief that there's a moral obligation to settle the debts of departed loved ones - or the fact that the relative is led to believe that he or she has a legal obligation to repay.

Such debt collection practices are reprehensible, and some almost certainly violate the federal Fair Debt Collection Practices Act, which prohibits the use of misleading statements or misrepresentations when attempting to collect. The industry's vultures - sorry, collection agents - prey on people whose grief has made them vulnerable. Some go so far as to offer to connect people with their in-house master "grief counselors" who will help them deal with their loss. The real point of providing such free services, of course, is to win the bereaved's confidence and get them to pay up.

Some collectors are trained to walk along the edge of the law by their employers. "We definitely tell them they have no legal obligation to pay. But is it disclosed up front - 'Mr. Smith, you definitely don't owe the money'? It's not that blunt," Scott Weltman, a principal in a Cleveland law firm that collects debts told Times reporter Scott Streitfeld.
...
Some relatives, if it makes them feel good, may get their money's worth by settling a loved one's debts. But before doing so, they should remember that creditors take the risk that their debtors might die. That's why lenders require borrowers to purchase mortgage insurance. Other lenders factor in the loss from a debtor's death when setting interest rates.

More: http://www.cmonitor.com/apps/pbcs.dll/article?AID=/20090309/OPINION/903090311

[Lex]

1. To repeat, debts are not "inherited" or "passed on" to heirs.

Unless you signed or co-signed for the loan/debt/credit card, you aren't responsible for it if you loved one/relative dies.

[MrPerson]

2. If you open an estate for the deceased, the creditor can file a claim to be paid from the assets of

the deceased

[Lex]

4. of course, but that's from the assets of the deceased,

NOT the assets from any of the heirs

[Tab]

3. I don't know the nuances

but that's my general understanding. There are exceptions, I think, like debtorship for the receiver ownership of an estate in default, but in general, if my uncle Adam were to die and owe $30 million, and name me as sole inheritor, I don't think I should suddenly be owing $30 million.

There's a point where you take everything in stride and account for it, and that's what insurance does. They do it for a fee, but their business is calculating odds - much more any any one person can do. They decide what to charge to afford to take the risk if things go south. If things succeed, whoopee for them. They escaped a payout. But if things fail, then they need to step up and make things right. They may not like it, but that's the whole point of insurance. Most people won't need any of it, but some will do, and you have to support them, otherwise your credibility as an insurance agent is lost.

[Lex]

5. Right. If debts of the deceased exceed assets of the deceased, then

you as "heir" will likely not get anything from Uncle Adam, but you also do not have to pay any of your own money to settle Uncle Adam's remaining debts either.

The credit card companies would like you to think so.

[provis99]

6. varies from country to country

If you're a Canadian and a parent dies in debt, you're screwed: you inherit debt there.

[Lex]

7. I'd like to read about that. Do you have a link?

Seems like an odd rule for Canada to have in place.