Am I Liable for My Deceased Spouse's Debts?

My wife died with $17K in debt. Am I liable? Can the credit card company put a lien on my house for the debt?

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Bill's Answer: Answered by Mark Cappel

My condolences on your loss. If you remember anything I am about to write, please let it be this: Do not believe legal advice from collection agents. The legal advice collection agents offer is usually incomplete or wrong, as is always self-serving.

Deceased Spouse’s Debt

Some people assume a decedent’s debt is forgiven or possibly written off by creditors. The law does not work that way, with the exception of federal student loans. However, spouses or other relatives are not responsible for the decedent’s debt automatically, either. Many collection agents take advantage of a debtor’s grief and ignorance of the law to imply the family must pay the decedent’s debt, but that may not be the case.

When a person dies with a will, the will controls the financial affairs of the decedent’s assets, which is called the “estate.” A will distributes assets, not debts. However, before any assets can be distributed to the heirs, all known debts must be paid by the executor. Therefore, the executor will sell assets in the estate to pay for any debts that remain. Only after the debts are paid will the remaining assets be distributed among the beneficiaries of the will. The process I just described is called probate, and a lawyer experienced in probate law can guide you through the process.

If a person dies without a will, this is known as “dying intestate” in lawyer-speak. In this situation, the court appoints an administrator to handle the distribution of the decedent’s assets according to the laws of the state. As with dying with a will, assets are distributed after debts are paid. Again, a lawyer experienced in probate law can guide you through this process.

Here is a key point: If the estate is insolvent the creditor has no legal right to collect the debt from family members, children, or friends. In most states, the creditor cannot collect from the spouse either. However, in community property states, the question becomes more complicated.

Deceased Spouse’s Debt in Community Property States

Community property states include Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Generally speaking, in community property states, debt incurred by a spouse for the benefit of the family is considered a “community” debt, and therefore the spouse is responsible for repaying that debt.

However, no two community property states use exactly the same laws. As a consequence, if you live in a community property state and have a spousal debt issue, it is imperative that you consult with an attorney in your state so that you understand your rights and liabilities in your particular circumstances.

Your Questions

You mentioned Alabama. Alabama is not a community property state, so my discussion about community property law does not apply to you if you reside in Alabama. You did not mention whether your wife died with a will. I will assume she died intestate (without a valid will). In a process called probate, the administrator will review all of your wife’s assets and debts. You mentioned she had “credit insurance” on the vehicle, which I will infer means the balance of the car loan was paid when your wife passed away. The vehicle is an asset in her estate, unless your wife had your name on the title with hers. If your name is on the vehicle’s title, the vehicle became yours upon her passing.

For the sake of argument, let us assume her name was on the vehicle title alone. Let us also assume she had no other assets. And finally, let us assume the fair market value of the vehicle is $17,000. If that is the case, the administrator will sell the car, and pay the credit card company the balance owed, leaving you and her other heirs nothing. However, if the vehicle is worth more than the balance on the credit card account, then the remainder after paying off her debts will be distributed to your wife’s heirs. On the other hand, if your wife’s vehicle is worth less than $17,000, the administrator will sell it, give the proceeds of the sale to the creditor, and look elsewhere in your wife’s estate for the balance.

Spousal Debt and Real Estate

I am concerned about the title of your home. You used the phrase “We own a home...” This implies both of your names are on the title.

The exact language used in conjunction with the names on the title is extremely important. If the language on the title is “John Doe and Jane Doe, as joint tenants” or “John Doe and Jane Doe, as joint tenants with right of survivorship” then your spouse’s interest in the property passed to you at the moment of death automatically.

Similarly, if the phrasing of the title is something like, “John Doe and Jane Doe, with a tenancy by the entirety” then your spouse’s interest in the property passed to you at the moment of death automatically.

With either a joint tenancy or a tenancy in the entirety, because your spouse’s interest passed to you without going through the probate process, the house is not an asset of your spouse’s estate. That means that the creditor’s have no legal means of stating any claim against your house — there is no way for them to attach a lien to the house.

On the other hand, if the phrasing used on the title to the house is something like, “John Doe and Jane Doe as tenants in common,” then we have a more complicated situation.

Tenancy in Common

In a tenancy in common, each person on the title has an undivided interest in the property. Each person can dispose of their share of the property without it affecting the ownership rights of others. Unlike a joint tenancy or a tenancy in the entirety, upon death the decedent’s interest does not flow to the other owners instantly. Instead, the interest is considered an asset of the estate, and is distributed according to the decedent’s will or the state’s intestate distribution rules.

In this case, if the house was titled as a tenancy in common, you would retain your interest, then as spouse receive one-half of her interest. Her remaining interest would proceed through probate. If estate was debt-free, the remaining interest would be distributed to her other heirs, such as any children she may have had.

If the house was titled as a tenancy in common, and your spouse’s estate had outstanding debt, then it is within the administrator’s power to sell the interest to raise funds to satisfy the debt.

As you may have gathered, the rules regarding how a property may be titled are intricate (they are almost universally hated among law students, too, but I digress.) For that reason, I recommend you take the documents regarding your spouse’s vehicle loan, her recent credit card statement, the title to your property, and any other documents that you think may be important regarding her finances to an Alabama attorney experienced in property or probate law. He or she will review the entire situation and give you a more detailed and precise discussion of your rights and liabilities.

Summary

First, for additional general information on who is responsible for deceased person’s debts, see the Federal Trade Commission documents Paying the Debts of a Deceased Relative: Who Is Responsible? and FTC Issues Final Policy Statement on Collecting Debts of the Deceased. Both documents are excellent starting points for family members dealing with this issue. Second, to learn more specific information about your state’s probate rules, consult with a lawyer in your state experienced in probate law.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

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Comments (46)


Sam C.
Millbrook, NY  |  October 24, 2012
Mom died. She was on the deed to the house but not the mortgage. Her (estranged) husband is claiming there is a lien on the house for student loans she didnt pay and that he was unaware of. He cant sell or refinance. To my knowledge there is no will. Is he liable? He wants to dispute it saying their relationship hadnt begun at the time she withdrew the student loans. ---Daughter, NY
Bills.com
October 24, 2012
Impossible to answer your question without knowing:
  • The state where the property is situated, and
  • How the property was titled (joint tenancy, tenancy in common, tenancy in the entirety, or community property)

Perhaps I lack imagination, but I fail to see what difference it makes if the student loan debt was pre-marital or incurred during the marriage. The issue is the lien was placed on property the debtor owned while she was alive. Depending on the state's laws and the property's title, the lien either remains in full effect or ceased when judgment-debtor died.

The surviving spouse should consult with a lawyer who has probate or property law experience to learn his rights and liabilities. Yes, a lawyer's time is not cheap, but if the circumstances are such that the lien is not longer effective, the lawyer's hourly fee will be money well spent.

Cindy L.
Merritt Island, FL  |  May 12, 2012
My mother pass away this year. There as no estate she had 5 credit card under her name only had less then $10,000 on them. My Father went to in lawyer in Florida. The lawyer told him that Florida is not a Non community property state. Three of my mother credit card company has turn later or no payment over to my father credit report. What do I tell do now?????
Bills.com
May 14, 2012
Your statement, "There is no estate..." is not quite correct because you went on to say, "she had 5 credit card under her name only (and) less than $10,000 on them." The general rule is, if a deceased person has any assets or liabilities, the decedent has an estate.

What may be true is the decedent's family may not need to probate the estate. You mentioned Florida. Consult with a Florida lawyer to learn what, if any, steps your family needs to take to notify the decedent's creditors about their share (if any) of the estate.

Regardless of your mother living or not, it is inaccurate for the original creditor or collection agent to place one spouses debts on another's credit report in common law states. My advice?
  1. As I mentioned earlier, consult with a probate lawyer.
  2. File a dispute with each of the three credit reporting agencies that are publishing the erroneous information.
Julie W.
March 12, 2012
My husband passed away in December leaving behind unpaid medical bills (of which I was unaware). His assets were CDs and bank accts. that listed me as beneficiary. These I transferred into my accounts. Sometime in late January the hospital and his doctor began sending me statements listing me as "financially responsible". A short while later I began getting calls from collection agencies demanding payment for medical bills I had no knowledge of. As an Oregon resident it was my understanding, since I didn't sign any agreements with the doctors or hospital, that I was not responsible for these debts. Am I correct?
Bills.com
March 13, 2012
You must probate your deceased spouse's estate. Consult with a lawyer who has probate experience to begin this process. Your probate lawyer will instruct you in how to handle the calls from creditors.
Nicole M.
Canton, OH  |  March 04, 2012
My mother passed away January of 2012 in Ohio, she has been married to my father for 48 years. She bought their first home January of 2011, due to my father having a social phobia he didn't go with her to be put on the deed to the home and she did not have a will. I know we must go through probate. My question is, since my mother does have old bills against her, will my father lose their home? Her name was the only name on the deed and she had left no will.
Bills.com
March 05, 2012
My short answer is, "probably not." You mentioned Ohio, which is a common law family law state. This is a bit of an oversimplification, but in common law states, separate debt stays separate, and a spouse is not responsible for a deceased spouse's debts. Again, that's a general rule, and there are exceptions. Try to convince your father to consult with a probate lawyer, who can guide him through the process of tallying all of the debts and assets, and notifying creditors of their share (if any) of the assets.
Chris R.
Easton, PA  |  February 23, 2012
My mother recently passed away. She had a will leaving everything to my father. The only asset she had in her name was a 1999 car with little value. She also owed balances on 2 credit cards that were in her name only. My father has been contacted a couple of times in the past week by a collection agency for one of them. Both times he was told that he was not responsible for her debt but they wanted the name of the person responsible for handling the paying off of her debts. Since she didn't have an estate to speak of as they owned everything but the car together, does he have any responsibility to pay the credit cards?
Bills.com
February 23, 2012
The answer to your question is, "No, your father most likely has no liability for his deceased spouse's separate credit card debt." However, your father should consult with a lawyer in his state who has probate experience to learn a more precise answer than the one I just offered.
Deena S.
Brooklyn, NY  |  January 30, 2012
My grandmother died in December 2011 without a will (NY Resident). She had a home (all mortgages paid), a car, 1 bank account and a college fund for her great-grandchild (my daughter). So far, her medical, credit & misc. debt totals $17,000. Will we have to tap into the college fund to pay off her debt? We really don't want to sell the house.
Bills.com
January 30, 2012
Her estate is liable for her debts. You need to speak with an experienced probate attorney, to find out the best way to satisfy her creditors and use her assets wisely and to your best advantage.
Sara P.
Philadelphia, PA  |  December 27, 2011
Hi. My father passed away a few months ago, and he left everything in his will to my mother. We live in PA, a non community state. My mother received most of everything - her name was on all property, except: her name is not on the deed to a rental property. They were married almost 35 years, and although the property was purchased by my father before their marriage, she has been paying the mortgage on the property, as well as upkeep, etc. for the entirety of the marriage. Now, she is stuck paying the mortgage which has skyrocketed b/c no one will give her home insurance since she is not on the deed. She was advised to open an estate for the house, but will receive nothing from it due to my father's debt. So, my question is: is the house hers since it was left to her in the will, even if her name is not on the deed? Is she stuck paying the mortgage without getting anything out of the estate? She has a lawyer, but I have encouraged her to seek advice from another source as he is unreliable and not forthcoming.
Bills.com
December 28, 2011
I am not a lawyer, so I cannot give you legal advice. If you are unhappy with your lawyer, then it might be prudent to look for another one. Base your decision on the lawyer's competence and not the answer you receive. You do not mention if your mother is a borrower on the loan. If she is, then she is liable for the loan, and if there is a deficiency balance, after selling the property, then she very well could be liable for that.

In any case, the transfer of title and paying of the debt, should be done through an estate lawyer. If the deed and the loan were in your father's name, then his estate would be liable for paying off the loan, at the time of the transfer. If the sale brings insufficient funds, then the estate would be liable to pay, if there are other sources of money in the estate. In any case, seek advice from a lawyer who practices estate law.
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Bill K.
Irvine, CA  |  February 15, 2012
Depending on the state, the fact that community property money was used to pay for the rental, your mom would be entitled to half ownership. If your dad's liabilities exceed the assets, she may have to sell the property, but she would retain her half interest in the equity. This of course depends on if his debts were community property debts.
Bills.com
February 16, 2012
Thank you for your analysis. The answers to these types of questions vary according to the details of each case. Readers should consult with a lawyer who has probate experience for a tailored analysis and answer.
John D.
B/o Pottstown, PA  |  November 12, 2011
My father recently passed away. My mother is still living. The will leaves everything to my mother. My father had a car, with a loan that still has two more years of payments. The title and loan were in his name only. My mother wants to sell the car to someone. It would appear we need to put the title of the car in her name. But we do not have the title - the lienholder (credit union) has the title since there is still a loan on the vehicle. How can she sell the vehicle without having to pay off the loan first to get the title? I think the state (PA) has an option to change the title to the estate - should I do that?
Bills.com
November 14, 2011
The procedure used to transfer title will depend on the manner that the estate is executed. Read Pennsylvania's Department of Motor Vehicles fact sheet about transferring title after death of owner. If your mother wishes to sell the car, then you must contact the lender to deal with paying off the loan and discharging the lien. Contact your lawyer for any legal assistance needed.
Christa R.
Riverside, OH  |  November 09, 2011
My mother passed away in 2004. We didn't go through probate and now my father has passed. The attorney says we have to close my mother's estate first. She has a judgement for $16,000. We just discovered will we be responsible for this out of my fathers estate.
Bills.com
November 09, 2011
Follow your lawyer's advice. Your situation illustrates how important it is for every estate to go through probate.
Amy T.
Holderness, NH  |  October 12, 2011
my mother is naming me executor of her will, and she will probably pass soon. but she has barely any assets, none that i cant even think of that would generate any money to pay off her hospital debt.. no car, no house, no stocks bonds or savings, no life insurance... whats going to happen to the quarter of a million dollars in hospital bills after she passes? i dont think i will personally be responsible for them but with no assets there is no way to pay off debt so then what?
Bills.com
October 12, 2011
You need a quick education in your mother's state probate laws. This is a vast oversimplification, but think of probate as a bankruptcy filing. All of the assets are accounted for and tallied, and the same is true for debts and liabilities. The liabilities are ranked and paid until all of the assets are exhausted. Unpaid and underpaid creditors are notified the estate's assets are exhausted. If there are more assets than liabilities, then the heirs and people mentioned in any will are paid.

Again, what I wrote above is simplified to illustrate the process in general. A lawyer in your mother's state who has probate experience can guide you through the process in detail.
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