Melissa and Brian Schultz of Grand Rapids, Mich., were at a floral shop, picking out an arrangement for their church's altar to celebrate their first wedding anniversary, two days away. As they mulled over the choices, Brian said, "My jaw hurts."
Ten minutes later he collapsed, dead of a massive heart attack. He was 37. At 34, Melissa was a widow while still a newlywed.
A little more than a week later, the phone calls from creditors began.
"They said, 'You're his wife. You have to pay this,'" Melissa, now 36, remembered. "Some of them kept calling and calling."
Debt collection after a death is a specialized and growing field, industry experts say, with some companies employing specially trained agents to handle these delicate calls. The task is complicated by the fact that many borrowers, like Brian, haven't prepared for their own deaths, and survivors may incorrectly believe that debt disappears at death.
"The debt doesn't go away, except under certain limited circumstances," said Dave Cherner, a corporate counsel for ACA International, a trade association for debt collectors.
Liz Weston
But grieving family members say the calls are often persistent and intrusive -- and sometimes harassing. Collectors may insist the survivors have an obligation to pay the debts, when in fact they have no legal duty to do so.
Melissa Schultz was particularly distressed about repeated calls from collection agencies saying she had to pay her husband's federal student loans. The debt was part of the $30,000 in loans and credit card bills he'd left behind. Schultz said that the calls continued "for eight to 10 months" after Brian's death, and that the collectors also contacted Brian's sister and cousin.
In fact, federal student loan debt is legally erased when the borrower dies, said Jane Glickman, a spokeswoman for the U.S. Department of Education. The department contracts with private companies to collect overdue student loan debt, but those collectors are supposed to stop their efforts once survivors send a death certificate to the loan holder or, in the case of Perkins Loans, to the school the borrower attended. (Schultz said that she had filed the appropriate paperwork and that her attorney had called the collection agency, but the calls continued.)
In general, survivors are on the hook for debts only when:
- They are joint account holders.
- They co-signed for a loan with the deceased.
- They live in a community property state where debts incurred during marriage may be considered joint obligations, even if they're only in the name of the deceased.
Otherwise, debts are supposed to be paid by the estate, if there's enough money left over to cover the bills after the "final expenses," such as funeral costs, are paid. And the definition of what constitutes an estate is more limited than what many people imagine.
Schultz, for example, was named the beneficiary of her husband's 401k plan, pension and life insurance policy. That money passed to her outside her husband's estate and couldn't be claimed by creditors.
Initially, she said, "I had no idea if I would have to use that money to pay Brian's bills . . . but I'd had a friend pass away from cancer and watched what happened to her family afterward, so I knew I shouldn't just fall over and pay (the creditors) from the life insurance."
Schultz said she had recently dug herself out of debt incurred in her 20s and didn't realize the extent of her husband's debt until he died. She said she wanted to do the right thing but didn't want to be saddled with new debts when she'd had no role in incurring those obligations.
"I was just trying to figure out how to get to the next day," Schultz said. "Trying to deal with all of this was just too much."
After spending a few sleepless nights attempting to research Michigan estate law on her own, Schultz realized she needed help and hired a probate attorney. The attorney advised her to tell the collection agencies that Brian was dead and, if they had any questions, they could call her attorney.
Some complied with her requests, she said, while others, including the student loan collectors, persisted in calling. Even today, 19 months after Brian's death (and also after the estate was finally closed), Bank of America still sends her bills in Brian's name for the $22,000 second mortgage he owed on a now-foreclosed property.
"They won't acknowledge he's deceased," she said. "I've sent the death certificate I don't know how many times."
