When my dad died of cancer in October 2018 in our small town of Loma Linda, California, we received a huge ICU bill in his name, exactly one week after he passed away. He had been in the ICU for 13 days after battling colon cancer for nearly two years.
As our family was still navigating the costly process of repatriating my father’s body to his native Malawi, the bill seemed surreal. The pile of bills felt so real, like Monopoly money. My mother and I sat together at the dinner table chuckling in horror and awe at the absurdity of being charged for my father’s death.
The nearly 10-page hospital bill detailing the technical details of my father’s last 13 days made me realize just how ignorant I was about my late father’s financial affairs, especially his debts. I was so naive that I didn’t even know there could be medical bills after death. It seemed ridiculous, but it’s the absolute truth of the economic reality of death in America.
Thus, information and research were my twin weapons in the months following my father’s funeral. I knew that my family could easily be exploited financially during such an emotionally sensitive time, and I was determined to prevent that from happening. As the only member of my family still living in the United States, I struggled for several months making phone calls and mailing copies of my father’s death certificate as I tried to sort out his U.S. financial affairs.
It’s been almost five years since my father’s death and I’ve seen frustrating and heartbreaking stories of families not only being left financially destitute after the death of a loved one, but also being taken advantage of by unscrupulous companies looking to maximise profits on a fine line between ethics and legality.Here are the five most important things people should know about the debts you may or may not owe to creditors after the death of a loved one.
1. Debt never goes away, but that doesn’t mean someone has to pay it back.
According to the Consumer Financial Protection Bureau, a person’s debts are assumed by their estate (money or property left after death), and any outstanding debts are paid off with the money left in the estate, which is handled by an executor named in the deceased’s will, or a government-appointed administrator if the deceased died without a will.
There are very few cases in which someone else, such as a spouse or parent, must repay certain debts of the deceased. For example, in community property states where married couples jointly own certain debts incurred during the marriage, the surviving spouse may be required to repay certain debts. Check your state-specific requirements to ensure that only debts that are legally owed are repaid.
2. Unsecured debts usually remain in the estate of the deceased.
Unsecured loans include credit card debt, student loans, personal loans, medical bills, etc. If there’s money left over to pay these off, your estate should take care of it, according to Experian.
Still, whether those debts are paid depends on the legal order for handling estate distributions. For example, if a person dies in a state where survivors are paid first, there may not be money left in the estate to pay off unsecured debts. Make sure the executor or administrator of the estate checks the requirements for a particular state before making any payments.
3. Someone has to pay back secured debt
The most common secured loans are mortgages and car loans. If an heir or someone else doesn’t repay, the asset that secures the loan (the home or car) can be claimed by the lending institution. Because home and car loans often have cosigners, it’s important to understand who is responsible for the debt and what will happen, especially if you plan to keep using the home or car after your loved one’s death.
4. Federal student loans are forgiven, but private student loans usually aren’t.
If you die with federal student loan debt, the loans will be forgiven. However, private lenders may require the loans to be repaid, especially for certain parent student loans and other cosigned student loans. Estate executors should contact the lending institutions directly to find out what applies.
5. Laws limit post-death debt collection
Family members of the deceased are emotionally vulnerable and, unfortunately, can be easy targets for aggressive debt collectors who will use any means necessary to force them to pay off the debts of the deceased. The Federal Trade Commission provides detailed information about what debt collectors can and cannot do to recover from a loved one after their death, especially to protect against potentially manipulative and deceptive practices aimed at loved ones who will do anything to convince them it is necessary to pay off their debts.
Dealing with a loved one’s debts after their death can be daunting and re-traumatizing. After my father’s death, I learned how bureaucratically difficult it can be to legally acknowledge the biological fact of a loved one’s death, especially when it comes to debts.
My father’s intensive care unit bill was finally written off after several letters and phone calls between me and the hospital billing department. The final letter I wrote to the hospital was to all of my father’s various medical teams, thanking them for caring for me and my family during the worst 13 days of our lives. And so began the emotional process of finally moving forward.
This article was originally published in May 2023.