Americans Are Dying With an Average of $62K of Debt

You’re probably going to die with some debt to your name. Most people do. In fact, 73% of consumers had outstanding debt when they were reported as dead, according to December 2016 data provided to Credit.com by credit bureau Experian. Those consumers carried an average total balance of $61,554, including mortgage debt. Without home loans, the average balance was $12,875.
The data is based on Experian’s FileOne database, which includes 220 million consumers. (There are about 242 million adults in the U.S., according to 2015 estimates from the Census Bureau.) To determine the average debt people have when they die, Experian looked at consumers who, as of October 2016, were not deceased, but then showed as deceased as of December 2016. Among the 73% of consumers who had debt when they died, about 68% had credit card balances. The next most common kind of debt was mortgage debt (37%), followed by auto loans (25%), personal loans (12%) and student loans (6%).
These were the average unpaid balances: credit cards, $4,531; auto loans, $17,111; personal loans, $14,793; and student loans, $25,391.
That’s a lot of debt, and it doesn’t just disappear when someone dies.

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What Does Happen to Debt After You Die?
For the most part, your debt dies with you, but that doesn’t mean it won’t affect the people you leave behind.
“Debt belongs to the deceased person or that person’s estate,” said Darra L. Rayndon, an estate planning attorney with Clark Hill in Scottsdale, Arizona. If someone has enough assets to cover their debts, the creditors get paid, and beneficiaries receive whatever remains. But if there aren’t enough assets to satisfy debts, creditors lose out (they may get some, but not all, of what they’re owed). Family members do not then become responsible for the debt, as some people worry they might.
That’s the general idea, but things are not always that straightforward. The type of debt you have, where you live and the value of your estate significantly affects the complexity of the situation. (For example, federal student loan debt is eligible for cancellation upon a borrower’s death, but private student loan companies tend not to offer the same benefit. They can go after the borrower’s estate for payment.)
There are lots of ways things can get messy. Say your only asset is a home other people live in. That asset must be used to satisfy debts, whether it’s the mortgage on that home or a lot of credit card debt, meaning the people who live there may have to take over the mortgage, or your family may need to sell the home in order to pay creditors. Accounts with co-signers or co-applicants can also result in the debt falling on someone else’s shoulders. Community property states, where spouses share ownership of property, also handle debts acquired during a marriage a little differently.
“It’s one thing if the beneficiaries are relatives that don’t need your money, but if your beneficiaries are a surviving spouse, minor children — people like that who depend on you for their welfare, then life insurance is a great way to provide additional money in the estate to pay debts,” Rayndon said.
How to Avoid Burdening Your Family
One way to make sure debt doesn’t make a mess of your estate is to stay out of it. You can keep tabs on your debt by reviewing a free snapshot of your credit report on Credit.com, in addition to sticking to a budget that helps you live below your means. You may also want to consider getting life insurance and meeting with an estate planning attorney to make sure everything’s covered in the event of your death. If you’re worried about leaving behind debt after death, here’s more on how protect your loved ones.
Poor planning can leave your loved ones with some significant stress. For example, if you don’t have a will or designate beneficiaries for your assets, the law in your state of residence decides who gets what.
“If you don’t write a will, your state of residence will write one for you should you pass away,” said James M. Matthews, a certified financial planner and managing director of Blueprint, a financial planning firm in Charlotte, North Carolina. “Odds are the state laws and your wishes are different.”
It can also get expensive to have these matters determined by the courts, and administrative costs get paid before creditors and beneficiaries. If you’d like to provide for your loved ones after you die, you won’t want court costs and outstanding debts to eat away at your estate.
Remember, estate planning can involve more than just drafting a will. Here are 7 documents you’ll need to fill out before you die. How do you deal with your debt and its effect on your plans for the future? Join the conversation on Facebook or in the comments section below.
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Source: Ramsey Debt Relief Feed 1

Here’s Why You May Want to Talk to That Debt Collector Before Tax Season Ends

Here’s something your may not know: Tax season is like Christmas for debt collectors.
In fact, as a past-president of a national debt collection company, I can tell you some agencies will collect as much money from February through May as in the remaining eight months of the year. Why?
Well, the first reason is a bit obvious: Many consumers in debt will receive a tax refund and go on to use that money to pay off their delinquent debt. Second, many debt collectors are good at what they do and want to help consumers resolve their outstanding liabilities. They’re willing to work out or negotiate a payment plan the consumer now has the ability to repay. (And, yes, that means the debt collector who’s been contacting you may be willing to settle up for less than what you owe.)

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So who has the upper hand when it comes to getting debt repaid during tax season? If the cards are played right, both the consumer and the debt collector come out ahead.
During this time of year, consumers are generally going to come across two types of debt collectors. The first is a debt collector who understands a consumer has access to a limited tax refund — and is potentially trying to pay off a multitude of debts. This collector will be looking to help the consumer resolve as many debts as possible with the funds they receive back from Uncle Sam. The other type of debt collector will hold their ground, knowing the consumer has funds to pay off a singular debt, and will ultimately refuse to negotiate payment for a lesser amount. Odds are consumers will run across both types of debt collectors during this time of year.
What Drives a Debt Collector’s Settlement Stance?
If you have an outstanding debt, it is important to understand the delicate balance collectors face during tax season. Several factors determine what debt collectors ultimately are able to do for consumers looking to settle a debt for less than what is owed.
The main factor is the client whose behalf they are collecting on. Settlements live and die with the requirements of a client; either they authorize the debt collector to offer a settlement or they do not. If the client allows for settlements, it is dependent upon the agency as to when, where and/or how they offer one. Some agencies may only offer settlements for accounts on file for 60 days or more, whereas other companies will offer settlements on the first day the account gets to their office.
The Odds Are in Your Favor
It is more probable than not that during tax season a debt collector has the ability to offer a settlement. Contrary to popular belief, debt collectors do not like to turn away money, especially this time of year. While one may hold firm for a while, when approached with a reasonable settlement offer, they will generally do what is in their power to get it approved. They may be willing to waive excess interest, late fees and other non-principal-related charges before tax season is up as well.
On the flip side, consumers should not expect a debt collector to take “pennies on the dollar” to settle accounts. Even if their agency did directly purchase the debt — which happens less frequently these days — the debt collector you’re dealing with isn’t the person who directly bought the debt, and they are going to be required to follow the guidelines set forth by their employer. You can find more tips for negotiating with a collector here.
The Bottom Line
Tax season can be a mutually beneficial time for the consumer and the debt collector, so if you’re hoping to shore up an outstanding account and/or are looking to strike a deal, now may be the right time to do so.
Just keep in mind, if one side tries too hard to “game” the other, an opportunity to resolve a bad debt will likely fall through and that bill will remain delinquent. At the end of the day, if consumers and debt collectors engage in a professional and respectful dialogue, it’s likely they’ll reach a resolution that benefits all parties.
[Editor’s Note: A collection account can wind up hurting your credit score. To see where yours stands, you can view your free credit report snapshot, updated every 14 days, on Credit.com.]
This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.
Image: filadendron

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Source: Ramsey Debt Relief Feed 1