How to Deal with Debt After Death of Spouse

If you were left with debt after the death of a spouse, gather bills, check credit, talk to the IRS and consider contacting an attorney.

Q: My home is underwater, I’m at risk of foreclosure, and I have a deceased deadbeat husband. Add to that that my dead husband liked to sign my name to things, I now have to deal with IRS liens and legal bills from attorneys. There’s just too much bad news all around me, and I feel that so many people are trying to take advantage of me. Do you have any advice for me?

A: We’re sorry you are going through such a difficult time. You need to find some people you can trust who will help you navigate the many issues you are facing.

While you might rely on your attorney for legal information, you need to know that legal expenses are often costly and don’t necessarily pay off. Make sure you have an understanding and written estimate of what those expenses will be before going too far with any attorney.

It’s truly hard to tell you where you should start or go from the many issues you raised in your letter. You might want to evaluate your housing situation first. If you can’t afford the home you’re in, you might decide to sell the home through a short sale and find a place to live that will fit your budget.

The next issue to deal with may be your husband’s estate. If he left debts, you need to determine which debts need to be paid by you and which won’t be repaid, as he is now dead. If you don’t feel comfortable with the attorney you are using, you might want to talk to a different attorney. Try to find an attorney who is steeped in consumer finance and can assist you in making savvy decisions that protect your finances now and will help you going forward.

You also need to determine what assets your husband left, and what assets transfer automatically to you without the assistance of an attorney or court. Frequently, assets held in IRA and other retirement accounts and life insurance policies can transfer easily to you – if you are the beneficiary – by calling those companies and sending them a copy of the death certificate along with some other documentation.

For bank accounts and assets that might have been in your husband’s name alone, you might need a court order to transfer them into your name. Once you have taken care of your deceased husband’s assets, you can evaluate what you have and where you should go.

We’re intrigued by your referral of your late husband as a “deadbeat.” We’re not sure if he committed actual crimes, like theft, or he stole or used items without paying for them. Was there fraud involved? If you live in a community where the police force is friendly and helpful with its residents, you should consider talking to a detective there. The detective can assist or guide you in any fraud issues you face with your deceased husband. While the detective won’t and can’t do your legwork, you may be referred to find someone willing to walk you through the steps you need to take to right some of the past wrongs. You might need to file a police report and document any fraudulent signature your husband signed on your behalf.

Since it appears that your husband signed your name to many items, you might need to obtain a copy of your credit report from each of the three major credit-reporting bureaus. You can obtain a free copy of each of those reports from AnnualCreditreport.com. At this site, you can get those reports free from each of them once a year.

You can look over the report to determine which accounts you actually signed for and which your husband signed without your knowledge. With that list in hand, you can then call those creditors and alert them to the fraud. With a copy of the police report, you can attempt to have those accounts closed and have the balances written off. However, keep in mind that if you benefited from the purchases from those accounts, those creditors might be unwilling to write off the amounts owed. The corollary should be that if you didn’t benefit from those accounts and you didn’t sign for them, you shouldn’t be liable for them.

It’s in these instances that guidance from a good detective at your local police department combined with an attorney steeped in consumer finance can help.

You should consider placing a fraud alert on your credit. Just in case your deceased husband gave your information to someone else, you shouldn’t allow that other person to open an account in your name. You can go to Equifax.com, Transunion.com or Experian.com and file a fraud report. Once you file with one company, the information is sent to the others automatically.

Last, but not least, you can contact the Internal Revenue Service to work with them on your lien issues. If you husband caused the lien due to unpaid taxes or other matters, you should know there are circumstances in which an innocent spouse may not be liable for the debts of the husband. If you benefited from the money or there are other circumstances surrounding the lien, the IRS may still go after you, but you might find a sympathetic ear with the IRS. That’s not a promise, but a hope that your situation rises to a level where the IRS agent on the file is willing to view your situation from your perspective.

That takes us back to making sure that you find someone to work with that can help you talk to all these agencies and companies. You might be able to do it alone. If not, you can try to talk to an Enrolled Agent (licensed to represent taxpayers before the IRS) or an accountant to help you with the IRS. You can talk to a not-for-profit credit counseling service to work with you on your budgeting and credit issues (this should be a free or nearly free service, if you choose a credit counselor affiliated with the National Foundation for Credit Counseling (NFCC)). Should you wind up needing to unload your home in a short sale, you can get advice from a HUD housing counselor. Go to HUD.gov for a local referral.

Good luck and tell us how things turn out.


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