The morality of not paying for debt after death.

Great Debates
1

My mother died and left a bit of credit card debt. She had very little money. I have been put in charge of her estate. Yesterday I went to see a lawyer because there is just so much I don’t understand.

Anyway, here’s the debate. In the state of Maryland any debts must be recorded by the register of wills within six months. After which time no one can put a claim on the estate. Basically if the credit cards do not submit a claim to the courts in the next few months they will not be paid. From what I was told, by the lawyer, was that this is different then most states in which claims can come years later.

So basically, if the credit cards don’t say anything soon they don’t get their money and I don’t have to pay. This to me seems at least a bit wrong, however I do know that the card companies have insurance or something like that to pay off people who don’t pay or die and can’t. So should I, or anyone have to worry about someone else’s debt when they die? What’s to keep me from going on a huge vacation if I know I’m going to die soon, charging it all and not paying?

And if anyone wants to either use my situation, my mother has around 5k in debt, and 6k in cash. I could pay the credit off, but then I would not be able to pay for the house before I get a chance to sell it so I could lose it. I was told that I could make minimum payments for a couple of months then let it go. Basically I can not, at this time pay anything off. Though when the house and other things are sold then I would be able to, but that will not be for at least six to seven months so they would be SOL.

2

Well, there’s another alternative. Make the house payments because it’s a legitimate debt on her estate as well. Then pay off the credit cards. You can work out a deal with them. For a lousy $5k, they’ll be more than happy to work a deal with you. My friend almost lost her mom’s house because she was behind on her tax payment. Take care of that first.

Also, tap your brother and some other people for help in paying your mom’s debts.

3

I think you missed the point, if I pay the minimum on the credit cards, then in a couple of months stop paying, let the credit cards wonder why. Then after six months say screw it and never pay them back. This is what a lawyer told me yesterday. I wonder if he saw the look I gave him on that one.

See in Maryland, if anyone doesn’t figure out someone is dead, in this case my mother, and any debt they have, the credit cards, they must let the courts know within six months. If they do not then they have zero claim on any money. What do I care if my mother’s credit rating tanks? She can’t use it. By doing this I keep $5000 for the estate and the credit cards are SOL.

The house is a different matter, though I can’t remember exactly what. So I do have to make sure the house is paid for or we can lose it. The lawyer said this is common way to do things because Maryland is so different and most companies do not know it.

So, do I morally have to pay back the debt? Is it wrong to use the law to your advantage like this?

4

Is it morally wrong to claim bankruptcy? I don’t think morality enters into the equation at all.

5

Morality enters into the equation if it differs from what is legal. If your mom borrowed money (she did) and promised to pay it back (she did) and her estate has the money to pay it back (it does, once the house is sold) then you should pay them back. Period.

Any other suggestion is just an attempt to rationalize taking someone’s money. It might be legal, but that doesn’t make it moral.

Now, I don’t think you are under any requirement to screw up your own finances, or foul up the management of the estate in an effort to pay immediately, but you should pay when the estate has the money.

Bankruptcy is when you do not have the money to pay them back, it is a way to prevent debt from destroying your life, not a way to get out of paying back your debts.

6

There’s a mechanism for the credit card company to collect on the debt, and that’s filing a claim against the estate (as you mentioned in your OP). If they choose not to do that within the time period they have to do it, I can’t see that you’d have any obligation to pay at all.

7

You should speak to your lawyer to be sure that what you’re doing is legal. I’m just going to give my view of this morally.

The credit card company entered a contract with your mother, in full knowledge of the risk that she might die and they would never get their money. They were also fully aware of the laws that would apply if she did die, as they probably deal with this every day.

The credit card company didn’t enter into any contract with you at all.

If the law says the money is yours and you follow the law to get it, you have no moral obligation to the credit card company.

I would say that it is the credit card company’s responsibility to figure out whether their clients are dead. You shouldn’t have any responsibility to them, as you have no contract with them. If you decide to make payments on your mother’s debt for a certain amount of time, it’s their problem if they use that information to assume she’s alive. (Assuming the pay stub doesn’t say “payment of this bill is proof that you’re the cardholder and you’re alive” or something.")

8

But don’t you have an obligation to advise the credit card company of her death? It may be worth checking the terms and conditions of the card use before you decide to put this plan into action.

In addition, if you stop making any payments at all, within a couple of months you are likely to get a call from them querying the non-payment - at which point I suspect they may work out she’s died.

I would contact the company and work out a way to pay the debt back once the estate has been settled - they may be used to dealing with this sort of situation.

9

I did, he’s the one that actually told me to do this.

But how does one go about finding this out? I would say it would be next to impossible to check every couple of months for every card holder. The checks I would be using though say Estate of Eddie’s Mom so that should be some clue.

So then what about the other way. I do not have to pay the bills, except the house, until the estate is settled. Are the credit cards in the right to charge a missed payment, crank up the interest and whatever else they want making what would be owed hundreds more? I know that nothing can be done for at least a few months so the late fees would be $100 each card after four months give or take. I don’t even want to think of what the interest might be at that time.

10

It seems to me that your duty as executor is to the estate, not to its creditors. So the moral thing to do is to use all legal means to maximize the value of the estate.

I would do as your attorney advises.

11

I don’t think you have any moral obligation to pay the debt. Credit card companies are taking a risk on the unsecured credit they offer, and they more than make up for it with the usurious interest rates they charge.

However, the estate does have a legal obligation to pay its debts. Making minimum payments as the executor and then claiming that the CC companies are out of luck after 6 months strikes me as a possible attempt at fraud. If your attorney suggests this plan, though, then you’re probably ok.

12

Note that if there were any monies the CC company were legally but not morally entitled to (make up your own hypothetical scenario), they’d absolutely 100% guaranteed come after you for it. I see no reason to go beyond your legal obligations to them.

13

I’m going to have to come down on the side of saying that this is immoral. I don’t think the credit card companies are making a mistake in your favor, rather I think they just don’t have all the information. Nor should they have the information, it would be unreasonable to expect them to be constantly checking up on every customer. By withholding this information, and actually continuing to make payments, you are attempting to decieve the company in order to trick them out of what is rightfully theirs (should they think to ask for it).

I’m trying to draw a distinction between this situation and one in which an actual mistake was involved, such as overpaying a bill. When one overpays a bill, it is one’s own fault because one reasonably should have known what the correct amount to pay was. In this case the payee has no moral obligation to return the money (though they may have a legal one, depending).

I don’t think it’s reasonable to assume that the credit card should know that your mother is dead. This situation is more akin to overpaying your cable bill because the bill was lowered, but the cable company never informed you (let’s assume they do not send out a new bill every month). Just because you don’t ask them every month if the bill changed (why would you if it hardly ever changes), doesn’t mean that you don’t have a right to know this.

I don’t think it’s that badly immoral though. Minus 2 points or something.

This would be a good question for that ethics columnist who answers questions on NPR. Can’t remember his name…

14

You go on ahead and act morally the moment the CC companies do.

My S-I-L received a CC solicitation. While in the hospital. In the cancer ward. (Along with a rather humerous bundle of other things, like shampoo)

SIL is fine now, but I’m still shocked at their predatory practices. They take death into account. Your responsibility is to the estate, not to them. Let them go pound sand.

15

A point of clarification: per the OP, the estate does not have enough cash to pay the estate’s debts. There is $6K in cash, $5K in credit card debt, an unspecified amount in a mortgage, and an unspecified amount in equity in the house.

Option 1: pay the credit cards with the cash, lose the house. The equity in the house may or may not be lost (i.e., some amount may be eaten up in foreclosure or the sale price may be less than it should be), so the mortgage may or may not fully be paid. This is, of course, a bad option because it is the least efficient use of resources and results in the most lost to the most number of people.

Option 2: do as your lawyer suggested and use the cash to maintain the house until it can be sold for a maximizing amount. If the credit card companies do not act upon their rights within the statutory period, so be it.

The law exists for a reason. It permits you, very quickly, to wrap up an estate and to go on with your life. It permits money and property that otherwise could be tied up for years to be passed on to beneficiaries quickly and thereby be used. Bottom line, if your lawyer has accurately advised you about the state of the law, you should not be concerned. A company, like a credit card company, that does business in Maryland likely knows what the law says, or is able easily to ascertain it. Don’t you think these arguments about morality already have been raised with the Legislature? In addition, what’s the difference, really, between a statutory period that is six months and one that is twelve months? Is twelve months inherently fair? What about eleven months?

Edward, I commend you for even thinking about these things. If it truly bothers you that much, if the credit card companies do not get a claim in in time, you can “make a donation” to them from your proceeds from the estate (your share, not the share of other beneficiaries, because you can’t take that from them without their permission/ without a legitimate claim on the estate).

The above is not legal advice, and I am not your lawyer. Nor are you my client. You have your own lawyer, with whom you should consult (as you have been.)

16

Would you feel bad about it if you did this? The way you feel about it (assuming you aren’t a sociopath*) is a good indication.

Also consider how you would feel if someone owed you money but avoided paying you by some similar trick…

  • If you were a sociopath I doubt you would even be asking this question.
17

IANAL, etc., etc.

As others have said, you have no obligation to dip into your *personal * funds. The debt is owed by the estate. The estate is obligated to pay its debts. Obviously, laws differ from place to place, and my experience as a co-executor of my late father’s estate may be of no validity in your location. However, what my sister and I did was to pay the credit card and other bills out of the amount left in Dad’s bank account. If the bank account had run dry before all the bills were paid, my guess would be that the creditors still had a valid claim on the estate. My non-professional opinion would be that if they’re sending a bill to the deceased, that’s an indication that there is a debt. Can the executor really say, legally, that he/she didn’t know the total due? I wouldn’t think so, but then I’m not educated in estate law.

On our lawyer’s suggestion, we did one of those public notices in small print in the newspaper that said any claims had to be made within 6 months, blah, blah, legalisms, blah, blah. My impression was that this was supposed to keep creditors and the like from coming out of the woodwork years later and claiming they were owed money, not that it applied to legitimate bills that we already knew about.

On another issue, regarding the ethics of credit card companies – one of Dad’s credit card companies tried to get us to pay for charges that appeared on his account at a time when he was hospitalized and in intensive care. There was no way he could have agreed to buy a “credit card protection service.” NFW. But the company tried to say that he did. Sheesh! :rolleyes:

18

Does it seem wrong that a credit card company can raise your rate to 29% if you are a day late? Of course not, it’s in the fine print, all legal, you agreed to it. By the same token, the credit card companies agreed to do business under the laws of your state. It’s in the fine print, all legal. Why is one moral and the other is not?

19

Just because something is legal does not necessarily mean that it is moral.

20

I’ll say this, if our OP feels that CC companies are the spawn of the devil who steal from their customers at any opportunity, then I could stand behind him in his quest to hurt them as much as he can, legally. That is taking a moral position based on your own experience and knowledge. OTOH, if he decides to not pay this debt, just because the law allows it, that is not a moral position, it is opportunism.

The golden rule isn’t “Do unto others as you think they would do unto you.” it’s “Do unto others as you would have them do unto you.” What the CC companies would do in this situation is not strictly relevant, we are talking about the OP’s morals, not theirs.