Debt After Death of A Spouse

Dealing with debt after deathCoping with the death of a loved one is difficult enough without the added stress of dealing with financial matters. Not only do surviving spouses have to practice efficient debt management skills on one income, but in many cases, they are also be responsible for handling their spouse’s outstanding debt and financial affairs.

Unfortunately, many Americans are under the impression that when a person passes away, their debt is forgiven. But in many situations, this is not the case. Often, grief-stricken widows and widowers are left responsible for large amounts of debt and are forced to manage that debt at a time when they are not in the ideal frame of mind. The good news is that there are many helpful resources.

What to do First – Before Debt Piles Up

Get Organized

Highly stressful events such as the death of a spouse can make dealing with debt management an extremely difficult endeavor. Clearpoint’s credit counselors advise that the first rule of thumb of effective debt management is to get organized. This can be a daunting task, especially if the spouse who has passed on did not keep detailed and organized records of their financial matters.

Start by listing every financial concern and source of debt that will need to be addressed:

  • Funeral service and burial costs
  • Estate, will and trust matters
  • Income and employment matters (such as pensions or social security benefits)
  • Investments (IRAs, mutual funds, CDs)
  • Tax documents (Income or property tax related)
  • Current bills (rent, mortgage, credit cards, etc.)
  • Miscellaneous expenses

Once you have created a detailed list of every financial consideration, determine which resources can help, and how. Establish which professionals you will need to contact, such as attorneys, tax accountants, investment advisors, etc. Then determine which concerns will need to be taken care of right away, and which are not as pressing. If you have difficulty paying your unsecured debts in a timely manner, a consumer credit counseling service, like Clearpoint, can help you manage your debt, pay your creditors, and learn effective budgeting techniques for the future.

Get Educated

Being educated about your financial situation and the legal matters that may surround them is vital to effective debt management. Seek out help from professional consumer credit counseling services and legal advisors to help you know your rights and, if you held a joint credit account, what you might be responsible for paying. Some important point that you need to consider are:

Have you co-signed for credit cards that have outstanding debt? Although many creditors may write off the debt incurred by a deceased customer, this is not the case if a co-applicant is on the account. The co-applicant will become solely responsible for the outstanding debt upon the death of the other. It is important to note, however, that by law creditors cannot close a joint account automatically. Oftentimes, the creditor will request that the surviving applicant file for a new application. Based on the surviving applicant’s credit history, a determination will be made as to whether or not to extend credit to that individual.

Do you live in a community property state? A community property state is one in which married couples are considered to own their property, assets, and income jointly. In community property states, credit accounts opened during marriage are automatically considered to be joint accounts. This could affect what you will have to pay, depending on the credit debt that your deceased spouse incurred.The following states are community property states:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

Did your spouse have assets that are subject to probate? Creditors can claim for probated debt. The term probate refers to the legal process of distributing the assets of a deceased person, and distributing those assets (with or without a will). It is important to note that assets which are jointly owned by the deceased spouse are not subject to probate.

Avoid Financial Crisis

What can you do to avoid a financial crisis? Death is never easy to handle, but you should take steps now to avoid the added stress of messy financial matters if you ever have to deal with them.

The best thing you can do now is to establish a strong credit record in your own name. This will not only help to build up your creditworthiness, but can also save you from many potential problems in the future.

Also, create an emergency savings account now to help with costs as they arise, such as funeral costs and other one-time expenses.

Ask for Help from a Consumer Credit Counseling Service This is an important time to have the support of friends and family, but you can’t rely on them for everything. If you find that you are falling behind and can’t pay your creditors on a consistent basis because you are living on only one income, don’t try to deal with managing debt on your own. Professional help is available from reputable nonprofit organizations such as consumer credit counseling services (CCCS), who can guide you through the process of managing your debt with the creditors you owe. Clearpoint Credit Counseling Solutions can offer guidance and support on everything from budgeting to a debt management program.

Call 800.750.2227 (CCCS) to speak with a certified credit counselor.