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COVID-19 and Financial Responsibility: Do I Have to Pay the Debt of a Deceased Loved One?

COVID-19 has been responsible for over 50,000 deaths worldwide. Not only are people struggling to deal with personal grief, but many are suffering economically and are forced to deal with a number of legal issues resulting from the probate process.

The focus of this blog is to address the recurring question of surviving spouses and relatives: “could I be held responsible for my deceased loved one’s debt?”

The good news is that in Colorado family members are generally not responsible for a relative’s debt after death unless the family member was a guarantor for the debt, such as a co-signer on a mortgage or car.

The bad news is that debts typically do not die with the debtor: creditors can pursue claims against the deceased’s estate. An estate is the sum of the assets of an individual person. In other words, if a loved one dies with assets such as real estate properties, stocks or a savings account, creditors can often come after those assets to remedy outstanding balances owed to them by the deceased.

With that being said, however, not every asset someone owns is up-for-grabs to creditors upon a debtor’s death. Creditors largely are prohibited from accessing retirement accounts with a designated beneficiary and life insurance policies, among other things.

Creditors’ ability to pursue claims against a deceased’s estate present issues and burdens for heirs of the estate. There can only be an inheritance if the estate contains enough assets to cover the deceased person’s debts. With that, executors (the person appointed to administer the estate) are required to ensure creditors are paid off properly and consistent with the law, and this can be tricky when there are not enough assets to cover the debt. Even in a situation where the estate is insolvent (the owner of the estate dies with more debt than assets) family members are still generally not required to pay off any debts, and debt collectors are legally restricted from being able to discuss a deceased’s debt with a family member.

Under the Fair Debt Collection Practices Act, collection agencies are prohibited from harassing, intimidating and inappropriately contacting someone who owes money. The Federal Trade Commission uses the FDCPA to bar debt agencies from using unfair or deceptive methods to collect debt. Though the law is well-defined, many collectors choose to ignore it and engage in unlawful practices.

If you are being contacted to pay the debt of another, need assistance navigating your duties as the executor of an estate, or have other questions related to probate, our lawyers at Cantafio & Song PLLC are here to guide you through this difficult time. Please contact us today for a free consultation.