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Dealing with Debt Management After the Death of a Spouse

Coping 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 may also be responsible for handling their spouse's outstanding debt and financial affairs as well. Unfortunately, many Americans are under the impression that when a person passes away, their debt is forgiven. This is often not the case at all. In many situations, grief-stricken widows and widowers are left responsible for large amounts of debt, and are having 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 resources available to help. Professionals such as consumer credit counseling services (CCCS) for example, are equipped with the knowledge and the tools to help guide a surviving spouse through the debt management process.

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. Consumer credit counseling services 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, then determine which resources can help you, 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 find that you are having difficulty paying your unsecured debts in a timely manner, a consumer credit counseling service can help you manage your debt, pay your creditors, and learn effective budgeting techniques for the future.

Get Educated

Consumer credit counseling services stress that 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. To learn more about how credit cards work, contact a certified consumer credit counseling service such as ClearPoint Financial Solutions.
• 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
• Might your spouse have had 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 (or other family member) are not subject to probate.

To educate yourself on other credit-related issues, get in touch with a consumer credit counseling service for professional advice and guidance.

What can you do to avoid a debt management 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 budget now to help with debt management issues 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 other family members to help you get through this period. If you find that you are falling behind and are not able to 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 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 Financial Solutions, a non-profit consumer credit counseling service, can offer guidance and support on everything from budgeting to a debt management program.