I See Dead People

Well, perhaps not…however that’s probably how a loan officer feels when he is sitting in his office with a client, pulls their credit and it is missing one or more scores because that particular bureau is coming back with a deceased status. So he calmly smiles, looks at the client thinking to himself – but you are sitting right here in front of me! He then says “we have a small problem here.”

So how does this happen? Usually it’s because of just one creditor who has inadvertently reported the account with a deceased flag which generates an ECOA (Equal Credit Opportunity Act) code of “X”. These determine what relationship the borrower has to that account. For example: B = Borrower, A= Authorized User, J= Joint, S= Signer, X= Deceased. In this case, the first thing to do is look at the credit report for a trade line that has an “X” as the ECOA code. Once you’ve found that you’ve found the problem. It can also occasionally show up as a “U” (undesignated), but normally it shows up as an “X”.

The easiest way to resolve this is for the borrower to contact the creditor and have them either report the account correctly or delete the account completely.

Another reason this may happen is because the borrower had a spouse or other relative that is deceased and they were on the account together in some way. If the latter is the issue, there are a couple of things to keep in mind when a family member passes that could prevent this from happening in the first place.

It’s important to know that when a relative passes on, unless a person is joint with them on an account, none of the remaining relatives can inherit the debt. This is true of an authorized user as well. They are not responsible for the debt. If a person is joint on the account however they will be held liable.

When a family member dies, it is up to either the surviving family member(s) or the executor of the estate to notify the deceased’s creditors of their death. If you as a family member choose to take this on, you need to contact each creditor individually and inform them of the account holder’s death. You will need to send a copy of the death certificate along with a note that contains the deceased’s name and credit card number. A copy of this should be kept for your records so that you have proof that it was sent.

Depending on your relationship to the borrower, the credit card company may ask if you would like to assume the debt. You may or may not want to do this depending on the history of the debt and what the balance is. The creditor wants to get paid though and may try to talk you into this. If you are not already joint on the account and do not want to accept the responsibility you do not have to.

Any debt the deceased has upon passing will be paid out of the estate. If there are no relatives on these accounts, they cannot be held liable. If there is not enough money in the estate, the creditor is still not able to come after family members for payment. At that point they would have to just write the debt off.

Dealing with the passing of a loved one is never easy. But as far as their debt goes there are things you can do to proactively to prevent any of that debt from haunting you in the future.

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