1. When someone dies and leaves behind several debts, who is responsible for paying these debts?
2. Can the funds in my bank account be seized or frozen by collectors?
3. Can debt collectors legally request copies of my credit reports?
4. Can collectors call my spouse and discuss my debts?
5. Can collection agencies add or charge interest?
6. Are creditors required to notify me before turning a delinquent account over to collections?
7. Am I responsible for my ex-husband's or ex-wife's debts?
8. My medical provider failed to bill my insurance company, am I still responsible for the debt?
9. What is Credit Counseling?



When someone dies and leaves behind several debts, who is responsible for paying these debts?
Whenever someone dies and leaves debts behind, a designated person (called an executor or administrator) handles the estate. If the deceased person did not have a will and was married, then, in many states the spouse automatically assumes responsibility (but not always) for the estate and, becomes responsible for paying off the debts on his or her own.

If the deceased person did not have a will and did not have a living spouse, then usually a close relative (son, daughter, mother, father, or a grandparent) is appointed as the executor of the estate according to state law. If there are no relatives, the state appoints an executor.

Even when an estate is worthless, the executor must still notify all creditors of the death. Debts from a worthless estate are generally charged off and no future collection actions are taken. However, as stated earlier, in some states a living spouse can still be held responsible for paying off the debts of their deceased spouse.

Always check your state laws and always consult with a probate attorney.

When the estate is worth something, the debts must be satisfied according to federal and state priority. For instance, debts owed to the federal government take first priority and then state government debts and after that, it depends on the types of debts and whether or not there is a will. Assuming there is a will, its instructions are followed and then comes secured debts, liens, judgments and finally unsecured debts. Here are two relevant excerpts from federal code...

"Section 3466 provides: 'Whenever any person indebted to the United States is insolvent, or whenever the estate of any deceased debtor, in the hands of the executors or administrators, is insufficient to pay all the debts due from the deceased, the debts due to the United States shall be first satisfied; and the priority hereby established shall extend as well to cases in which a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed, or absent debtor are attached by process of law, as to cases in which an act of bankruptcy is committed.' "

"Section 3467 (Comp. St. 6373) provides: 'Every executor, administrator, or assignee, or other person, who pays any debt due by the person or estate from whom or for which he acts, before he satisfies and pays the debts due to the United States from such person or estate, shall become answerable in his own person and estate for the debts so due to [269 U.S. 483, 487] the United States, or for so much thereof as may remain due and unpaid.' "



Can the funds in my bank account be seized or frozen by collectors?
The short answer is yes! If you owe creditors, collectors or anyone else money, they can obtain a money judgment and have the funds in your bank account frozen or they can seize them outright. Here is a brief overview of the rules:

Whoever holds a judgment against you can go to someone else who owes you money or is holding money for you and intercept that money through a wage garnishment or garnishment of your bank account.

Anyone who owes you money, or holds money for you, is called the "garnishee defendant" and through the garnishment process, can be forced to reveal to the court how much money they owe you.

Then, the court can require, through an order called a Writ of Garnishment, to force the bank or your employer to pay a certain part of the money owed to you, into the court registry. After receiving payment, the court turns the money over to whoever holds the judgment.

In order for someone to garnish your wages or bank account, they need to know someone who owes you money or where you bank or where you work before they can proceed with a garnishment action. The garnishment process costs a small fee (around $20.00 in most states), plus the costs of serving the papers. You will more than likely have to pay these fees as well.

Note: Only disposable earnings and the amount set by state law can be garnished from wages. Ask the clerk of the court for the correct amount in your state.



Can debt collectors legally request copies of my credit reports?
Yes, debt collectors can legally check credit reports!

When you sign credit agreements such as mortgages, credit cards, auto loans and so forth, you also agree to allow the creditor (and its designated representatives) to pull credit reports on you anytime they feel it's necessary.

This means they can pull your report periodically and most do. Some pull reports monthly, others quarterly and some only annually.

Two very common reasons for pulling credit reports are late payments and collection actions. In the case of late payments on credit cards, you can expect your creditor to not only pull your credit report, you can expect them to raise your interest rate. This happens thousands of times a day!

When your past due account is sent to collections, so does the right to pull your credit report. Thus, according to the Fair Credit Reporting Act, collectors have a legitimate business reason to review your credit report.

Can collectors call my spouse and discuss my debts?
According to the FDCPA, section 805(d); debt collectors can legally discuss the details of your debts with your spouse even if the debt existed prior to the marriage or the spouse is not on the credit contract.

The same rule applies to minors (less than 18 years old), to a guardian, executor, and parents.



Can collection agencies add or charge interest?
Interest on Debts when no judgment exists!

Section 808(1) prohibits debt collectors from collecting any amount unless the amount is expressly authorized by the agreement creating the debt or is permitted by law.

For purposes of this section, "amount" includes not only the debt, but also any incidental charges, such as collection [53 Fed. Reg. 50108] charges, interest, service charges, late fees, and bad check handling charges.

808(2) Legality of charges. A debt collector may attempt to collect a fee or charge in addition to the debt if either:

(a) the charge is expressly provided for in the contract creating the debt and the charge is not prohibited by state law, or

(b) the contract is silent but the charge is otherwise expressly permitted by state law.

Conversely, a debt collector may not collect an additional amount if either:

(a) state law expressly prohibits collection of the amount or

(b) the contract does not provide for collection of the amount and state law is silent.

808(3). If state law permits collection of reasonable fees, the reasonableness (and consequential legality) of these fees is determined by state law.

808(4). A debt collector may establish an "agreement" without a written contract. For example, he may collect a service charge on a dishonored check based on a posted sign on the merchant's premises allowing such a charge, if he can demonstrate that the consumer knew of the charge.



Are creditors required to notify me before turning a delinquent account over to collections?
The Truth in Lending Act and the Uniformed Commercial Code (UCC) requires any credit contract to come with a full disclosure statement that clearly spells out the terms of the contract. Many states also have consumer laws that speak to full disclosure.

Look at your credit disclosure statement for words similar to these:

"If I fail to pay the amount that you think I owe, you may report me as delinquent and send the account for collection action."

Since you agreed to credit terms that included the above statement, most creditors send monthly statements with an "amount due" highlighted somehow. When your account is delinquent, and your regular statement shows the past due amount, consider yourself notified!

Many creditors, as a courtesy, send a reminder or two of the past due debt and include a note that says the account will be sent to collections if you do not pay by a certain date.

Bottom line: Creditors do NOT always have to send a separate notice or call you before sending a delinquent account to collections.

This includes co-signed credit contracts as well. If the primary borrower defaults, the account can be immediately sent to collections without notifying the co-signer. An exception to this would be if the disclosure statement calls for the creditor to notify the co-signer.

If you plan to co-sign for a loan, make sure the terms of agreement include notifying you before the account is sent to collections.



Am I responsible for my ex-husband's or ex-wife's debts?
Whether you are responsible for your ex-husband's or ex-wife's debts depends on the circumstances surrounding the issue, your state law and perhaps most importantly, who signed the credit contract.

For instance, if your name is still on the credit contract you are still responsible for the debt regardless of what the divorce decree states.

It's important to understand that a divorce decree only spells out who is supposed to pay the debt. It does NOT legally change who is responsible for the debt.

When couples divorce, they usually agree on who pays what. For example, a car loan is in both names and the divorce agreement states that the ex-wife keeps the car and is responsible for making the payments.

Several months later, when the ex-wife defaults on the car loan, collectors start calling her and her ex-husband. The ex-husband claims that the debt is not his because his ex-wife got the car and the payment in the divorce.
The collector says it is the ex-husband's responsibility and will pursue legal action if he does not pay up. The collector is correct and will probably win in court!

During the divorce process and especially after the divorce is final, divorcing couples would be wise to have joint credit contracts revised so that only the name of the person responsible for the debt is on the contract.

Be advised that creditors are reluctant to do this, especially after a divorce, because experience tells them the chances of the loan becoming overdue is high and so having two people responsible for the debt is better because if one ex-spouse defaults, the lender can still pursue the other ex-spouse.



My medical provider failed to bill my insurance company, am I still responsible for the debt?
Some common myths:

1. Medical providers are required to bill your insurance company.

2. Insurance companies have to pay your medical bills.

The truth is, you are responsible for paying your medical debts. Now, if you happen to have medical insurance, AND the insurance company receives the medical bill in accordance with its stated requirements AND the medical service is covered under the policy, then and only then is the insurance company responsible for paying the debt.

Pay special attention to the words, "receives the medical bill in accordance with its stated requirements" because this is what gets people into trouble more often than not.

As a convenience, most medical providers offer to bill your insurance company. However, accepting their offer does not relieve you of the responsibility of ensuring the medical bill gets paid.

It's not uncommon for medical providers to submit medical bills after an insurance company's deadline for filing. In some cases, the provider may, for a number of odd reasons, not submit the medical bill at all. Regardless of the reason, the bottom line is that the consumer is still responsible for ensuring the insurance company "receives the medical bill in accordance with its stated requirements"!

In some cases, your insurance company may reject the bill or flat out refuse to pay. The fact that your insurance company did not pay is not the medical provider's concern! The medical provider has the right to expect you to pay the bill in a timely manner.

You may have to argue with your insurance company and even go through dispute resolution but while you're doing that, the medical provider is still entitled to timely payment. The best thing you can do is communicate with your medical providers to let them know you are working to resolve the issue. In the end, you may have to pay the provider yourself and then work with your insurance company to get reimbursed. Always read the medical provider paperwork (contract for services rendered) carefully!



What is Credit Counseling?
Credit counseling is a process offering education to consumers about how to avoid incurring debts that cannot be repaid through establishing an effective Debt Management Plan and Budget. Credit counseling is usually less typified by functions of credit education or the psychology of spending habits, rather credit counseling establishes a planned method of debt relief, typically through a Debt Management Plan.

Credit counseling often involves negotiating with creditors to establish a debt management plan for a consumer. A debt management plan may help the debtor repay his or her debt by working out a repayment plan with the creditor’s debt management plans set up by credit counselors, usually offer reduced payments, fees and interest rates to the client. Credit counselors refer to the terms dictated by the creditors to determine payments or interest reductions offered to consumers in a debt management plan.

The last line is the important to note because the effectiveness of credit counselors depend on the creditors acceptance of the payment plan offered.