February 1st, 2012 | written by Nancy Larson

A loved one dies and the phone rings urgently with creditors demanding payment on credit cards and medical bills.  Letter after letter demands immediate payment in full on credit cards of a family member who has recently died.  Who, if anyone, is responsible?

Debts don’t magically disappear at death nor do they automatically get paid by the surviving spouse or family.

Creditors collecting from an estate of a deceased person must file their claims in writing to the executor or to the attorney for the estate within six months of opening a probate estate.  It is the executor’s duty to advise creditors of the death of the family member, but it is the assets of the deceased that are used to pay the debts – unless there was a co-signer on the account.  Collection attorney, Tom LeChien, advises to read the fine print on credit card agreements to determine ultimate responsibility for credit card balances that survive after death.

If a balance exists, a credit card company has the right to payment from the assets of the estate but the creditor must file a claim and the claim must be set for hearing in the probate court.  If the creditor fails to appear in court at the hearing, the claim will be denied.

If the estate doesn’t have enough money to pay all the claims filed against it, then Illinois law directs the executor to give first priority to funeral bills, burial expenses, and expenses of administering the estate – including executor fees, court costs, and attorney fees.

If you are the spouse or relative of a decedent and have joint accounts or co-signed on a loan, then you, as the surviving account holder, are responsible for payment of the debt.

If you inherit a car from your mother, the loan on the car will not go away at Mom’s death.  You will either have to refinance the car, pay the balance on the loan in full, sell the car for more than the balance due and keep the overage, or simply allow the car to be repossessed.  If a Will directs for payment of debts, then the executor will pay the loan on the car and deliver title to you.

If you are named the executor of an estate or the trustee of a trust, seek legal advice before paying any bills.  In the world of Wills and trusts, sometimes the squeaky wheel does not get oiled first!  In other words, in Illinois, the priority in which debts are paid does not give first priority to credit cards and has other nuances that may come as a surprise.  As the executor or trustee, only move forward with the advice of an attorney so the estate is administered according to the law.

If you are expecting a distribution from Mom’s estate, that will only happen after all claims and debts have been settled.  In an estate that is insolvent  ( “upside down”), the beneficiaries or heirs-at-law will get nothing. The good news is that they will not be responsible for the debts of the estate unless they co-signed or were joint on a loan or credit card account.