Can collectors come after your inheritance?By Todd Ossenfort
Dear Credit Guy,
My
brother, sister and I recently were left half of an estate. My aunt received the
other half. Out of nowhere, old credit card debts from six years ago are
claiming to have a right to take my inheritance. Can credit card companies take
any of my money without my authorization or without talking to me? Also, do my
brother and sister and I have to sell the property if we don't want to? Thank you. -- Pete
Dear Pete,
It
isn't clear from your question if the credit card debt mentioned is yours, but
for purposes of my answer, I'm going to assume it is. The short answer is no,
your creditors cannot take money from you or force you to sell your property.
However, your creditors can sue in court to collect the debt and if they win
the case, the court can grant a judgment for the amount owed. With a judgment,
the creditor can petition the court for wage garnishment or bank account levy orders
or to place a lien on real property owned by you. However, to legally collect the
debt, the statute of limitations (SOL) in the state where you reside must not
have expired. To determine the statute for your state, read the CreditCards.com article "State statutes of limitation for credit card debt."
The good news is that only a few states -- Montana, Wyoming, Iowa, West Virginia and Rhode Island -- have statutes
longer than six years for credit card debt.
After
six years, it is much more likely that collection companies rather than your
original credit card issuers are seeking to collect what you owe. Collection
companies often attempt to locate persons whose debt they own by researching
public records. The awarding of the estate to you, your siblings and your aunt
would have been probated in a court and, therefore, the proceedings are public
record. That could be the reason why "out of nowhere" you were contacted about
the unpaid accounts. Keep in mind that although the debts may be past the statute of limitations,
some collectors will attempt to sue anyway, and you must be present (or submit
information to the court) to use the SOL as your defense.
So,
unless the collector has already received a judgment, your inheritance should
be safe. I recommend that you get free annual copies of your credit reports
from the major credit bureaus at AnnualCreditReport.com
and review what is going on with these credit card accounts. If a judgment has
been issued for any of them, it will be listed in the public records section of
the credit report.
Depending
on when the original accounts went delinquent (typically 180 days without
payment), the credit card accounts and the collection accounts associated with
them may be about to rotate off your credit report. Credit bureausare supposed to remove them seven years from the date
of first delinquency. But don't forget, even though you may be spared the pain
of all that negative history on your credit, I would not bet on the collectors
following suit. You may be harassed concerning these debts for many years to
come. You do have rights under the Fair Debt Collection Practices Act to stop
the harassment, however.
You
might consider using some of your inheritance to pay what is owed. You could
negotiate a settlement for each of the accounts. If you choose to do that, just
know that you will restart the statute of limitations clock on that debt. Make
sure you have the deal in writing before you pay and keep proof of payment just
in case the debts come back to life in the future. That way, you will not have
to worry about being hassled by collectors, and you will have paid at least an
agreed portion of what is owed.
Take
care of your credit!
See related: State statutes of limitation for credit card debt, How wage garnishment works -- and how to avoid it, Know your rights: Fair Debt Collection Practices Act
Todd Ossenfort is the chief operating officer for Pioneer Credit Counseling in Rapid City, S.D. Pioneer Credit Counseling has been a member of the Association of Independent Consumer Credit Counseling Agencies since 1997.
The Credit Guy answers a question about a debt or credit issue from a CreditCards.com reader each week.
Send your question to The Credit Guy.
Published: March 7, 2011
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