Auto Loan-Deceased Spouse

[DallasHorn26 587]

Ok lawyers, have a question for a relatives situation.  Wife purchased a vehicle and financed in her name only in early 2018.  She passed in September, leaving vehicle behind, no will, no major assets besides co-owned house with husband.  Husband falls behind on payments, lets car go, it gets repo'd.  My understanding is that its going to auction house, and i'm sure there will be negative equity.  Can they come after husband for that deficiency despite him not being linked to the contract?  Finance company says no, however google tells me yes as Texas is community property.  

[TwiceHorn 31987]

18 minutes ago, DallasHorn26 said:

Ok lawyers, have a question for a relatives situation.  Wife purchased a vehicle and financed in her name only in early 2018.  She passed in September, leaving vehicle behind, no will, no major assets besides co-owned house with husband.  Husband falls behind on payments, lets car go, it gets repo'd.  My understanding is that its going to auction house, and i'm sure there will be negative equity.  Can they come after husband for that deficiency despite him not being linked to the contract?  Finance company says no, however google tells me yes as Texas is community property.  

Theoretically yes as a community debt (the community "estate" is liable for debts incurred by either spouse during the marriage that benefit the community).  As a practical matter, probably not, as most finance companies and their collection attorneys don't want to fuck with an account that doesn't have a signatory on the dotted line. 

Collection suits on credit cards and most other consumer debts are filed as "petitions on sworn account."  This makes it super easy on the collections company and their attorneys to get a judgment, because hardly anything has to be proven (signed contract, amount in arrears, boom a judgment).  If anyone has to do any thinking or work, as in to prove a spouse is liable for a community debt without a signature, it tends to be a nonstarter.

Also complicating it is the fact that the finance company was probably notified at some point of her death (they find this shit out one way or another), and the account was probably sent to "probate collections" or some such, where they are waiting to see if a probate is filed, because that is the cleanest way to sue a deceased debtor and "get at" estate assets to pay a debt.  Thus, no probate, no claim or suit.

Stranger things have happened though.

Edited February 12, 2019 by TwiceHorn

[SimonBolivar 11033]

20 minutes ago, DallasHorn26 said:

 i'm sure there will be negative equity. 

99.9% there will be.

[Bat Guano 363]

A car salesman tried to get my girlfriend to get some kind of insurance once for exactly this kind of situation, to pay off the loan if she died, so her family wouldn't be stuck with the payments.

Why would I care about that? I'll be dead, she said. Salesman was at a loss for words for a while.

[SimonBolivar 11033]

31 minutes ago, Bat Guano said:

A car salesman tried to get my girlfriend to get some kind of insurance once for exactly this kind of situation, to pay off the loan if she died, so her family wouldn't be stuck with the payments.

Why would I care about that? I'll be dead, she said. Salesman was at a loss for words for a while.

Yeah on the banking side we sell credit life too. I've only seen it purchased by people with kids still in the house. We also sell a disability version too.

Edited February 12, 2019 by SimonBolivar

[DCA_HORN 725]

Cross her off, then.

[ROFL BOX 6654]

Sorry for your loss.

 

Pics of wife prior to ded?

[TwiceHorn 31987]

I should add that while community property, i.e. that titled in the husband's name, but community nonetheless, can be executed on to collect a judgment against the wife for a community debt, I'm not sure that entitles a creditor to NAME a husband or spouse in a suit to collect a debt that is only in a wife's name. 

In other words, I don't think they can sue a HUSBAND for a WIFE's debt that only she signed for, even if that debt is unquestionably a community debt.  A lawsuit in Texas cannot be maintained against a deceased person.  Typically it is the estate that is sued, if there is one.  It's muddy as hell whether "heirs at law," those determined in the absence of a will, can be liable for debts if they inherit without a probate.  Probably so muddy that no creditor on a small consumer debt (say under 50k) is going to try to find out.

Edited February 13, 2019 by TwiceHorn

[Gil Bang 26177]

I'm not the OP, but I always appreciate how Twice shares his wisdom and experience on these lawyer questions.  

[Gil Bang 26177]

Just now, Gil Bang said:

1234

 

Edited February 13, 2019 by Gil Bang

[Sandman 3427]

17 hours ago, Bat Guano said:

A car salesman tried to get my girlfriend to get some kind of insurance once for exactly this kind of situation, to pay off the loan if she died, so her family wouldn't be stuck with the payments.

Why would I care about that? I'll be dead, she said. Salesman was at a loss for words for a while.

If she's young, not married and has no children, I'd have said the same thing. But when my parents built their house, they had the option to get one of those policies and they said nah, we don't need that. Mom died suddenly after about a year, Dad was kicking himself for not getting the policy, like he had any idea that was gonna happen. It certainly made me more paranoid.

[Liquor and Poker 3659]

19 hours ago, TwiceHorn said:

Theoretically yes as a community debt (the community "estate" is liable for debts incurred by either spouse during the marriage that benefit the community).  As a practical matter, probably not, as most finance companies and their collection attorneys don't want to fuck with an account that doesn't have a signatory on the dotted line. 

Collection suits on credit cards and most other consumer debts are filed as "petitions on sworn account."  This makes it super easy on the collections company and their attorneys to get a judgment, because hardly anything has to be proven (signed contract, amount in arrears, boom a judgment).  If anyone has to do any thinking or work, as in to prove a spouse is liable for a community debt without a signature, it tends to be a nonstarter.

Also complicating it is the fact that the finance company was probably notified at some point of her death (they find this shit out one way or another), and the account was probably sent to "probate collections" or some such, where they are waiting to see if a probate is filed, because that is the cleanest way to sue a deceased debtor and "get at" estate assets to pay a debt.  Thus, no probate, no claim or suit.

Stranger things have happened though.

This is also assuming Texas or another community property state.  Is that 100% sure?  In a common law marriage state the answer is also complicated but boils down to “No - but maybe yes.”

Edited February 13, 2019 by Liquor and Poker

[TwiceHorn 31987]

3 minutes ago, Liquor and Poker said:

This is also assuming Texas or another community property state.  Is that 100% sure?  In a common law marriage state the answer is also complicated but boils down to “No - but maybe yes.”

OP stated Texas.

Quote

Sec. 3.202. RULES OF MARITAL PROPERTY LIABILITY. (a) A spouse's separate property is not subject to liabilities of the other spouse unless both spouses are liable by other rules of law.

(b) Unless both spouses are personally liable as provided by this subchapter, the community property subject to a spouse's sole management, control, and disposition is not subject to:

(1) any liabilities that the other spouse incurred before marriage; or

(2) any nontortious liabilities that the other spouse incurs during marriage.

(c) The community property subject to a spouse's sole or joint management, control, and disposition is subject to the liabilities incurred by the spouse before or during marriage.

(d) All community property is subject to tortious liability of either spouse incurred during marriage.

(e) For purposes of this section, all retirement allowances, annuities, accumulated contributions, optional benefits, and money in the various public retirement system accounts of this state that are community property subject to the participating spouse's sole management, control, and disposition are not subject to any claim for payment of a criminal restitution judgment entered against the nonparticipant spouse except to the extent of the nonparticipant spouse's interest as determined in a qualified domestic relations order under Chapter 804, Government Code.

 

So it's clear that the property is liable, but it is not clear that a spouse may be sued for the debts of the other spouse.  Executed upon, sure, sued, no.

[52-80 19379]

 

[Liquor and Poker 3659]

4 hours ago, TwiceHorn said:

OP stated Texas.

I know. I read it. But that doesn’t mean it’s absolutely guaranteed.  There potentially are some choice of law issues depending on the sales contract and the marital domicile.  

[Sbbruin 22082]

22 hours ago, Bat Guano said:

A car salesman tried to get my girlfriend to get some kind of insurance once for exactly this kind of situation, to pay off the loan if she died, so her family wouldn't be stuck with the payments.

Why would I care about that? I'll be dead, she said. Salesman was at a loss for words for a while.

Sounds like a shitty car salesman.  The fuckers they gotta buy!

 

[Rusty Shackelford 414]

22 hours ago, Bat Guano said:

A car salesman tried to get my girlfriend to get some kind of insurance once for exactly this kind of situation, to pay off the loan if she died, so her family wouldn't be stuck with the payments.

Why would I care about that? I'll be dead, she said. Salesman was at a loss for words for a while.

Why would her family be stuck with any car payments?

[TwiceHorn 31987]

I suppose we should discuss briefly how this is theoretically supposed to go down.  A person dies, leaving some property and debts, a spouse and children.

If the person has a will, the executor (typically the surviving spouse, but whoever) takes the will to the county probate court and opens up a probate.  The executor is duly appointed and is responsible for gathering the assets subject to probate and distributing them according to the will.  And also for paying the deceased's debts out of estate assets as the law requires.  The debts may be paid voluntarily (with the consent of the heirs) or through a process where the creditor is forced to file a claim in the probate court and the executor determines how, whether, and how much of it to pay.  If the creditor fails to make a claim in the relevant time period, the claim is barred.  An executor that gets aggressive with creditors may end up litigating with them at the expense of the estate, so there is motivation to settle or voluntarily pay claims.

If the person doesn't have a will, the process is similar, but the distribution of assets occurs by the laws of intestate succession of the state. The valid debts still get paid first.

The concept of exempt property (homestead + 30k personal property) applies in probate to the extent a living co-owner (spouse by community or other by joint ownership) can claim the homestead or other exemption.  Cash accounts other than IRA/401k and similar are never exempt in Texas.  If an estate has no property, or only exempt property, the creditors pound sand.

People don't file for probate because they are ignorant, lazy, and cheap.  If the deceased owned real property, that's going to be a problem at some point in the future.  Failing to file probate may work to partially or temporarily defeat creditor's claims.  A creditor can actually commence a probate without the consent of any other heir or interested party, though that is rare. So a determined creditor can force the issue.

Edited February 13, 2019 by TwiceHorn

[TwiceHorn 31987]

I should add to the above that in the specific case of a deceased's car, before the probate gets going and an executor appointed, someone, probably the husband, makes a couple of car payments, then once the executor is appointed, the executor has the choice of how to dispose of the vehicle:  keep paying, pay it off, sell it, etc.; and has the burden of keeping up payments to prevent foreclosure/repossession until disposition of the vehicle. The husband or other party making the payments has a claim against the estate for reimbursement of the pre-probate payments made.  Such payments would be made from the estate prior to any distribution of assets.

Similar deal with real estate subject to a mortgage.

I have been the executor of two estates, both mercifully debt-free.    It strikes me that a car still under a note would be a pain in the ass unless the loan balance was pretty small because of the "negative equity" scenario, which makes disposition of the car a Hobson's choice (shitty any way you slice it).

Edited February 14, 2019 by TwiceHorn

[Reagan1k 3040]

On 2/13/2019 at 8:45 AM, Sandman said:

If she's young, not married and has no children, I'd have said the same thing. But when my parents built their house, they had the option to get one of those policies and they said nah, we don't need that. Mom died suddenly after about a year, Dad was kicking himself for not getting the policy, like he had any idea that was gonna happen. It certainly made me more paranoid.

In that case, credit life would have obviously benefited your father , but in general it is a terrible deal.  If you need to insure against the debt, just buy term life to cover the balance and duration of the loan.

Credit life typically comes with a fixed cost but a declining benefit equal to the mortgage or loan balance.  You pay the same price in year 1 as you do year 30 and if the insured dies in year 25 for example, the small mortgage balance is the only thing that is paid off....survivors receive no additional proceeds.

Unless it is guaranteed issue and the borrower is otherwise uninsurable, it is always less expensive and a far more beneficial to simply cover the debt with a personal policy.

That way they get the full face value of the policy tax free at death and can use the funds as they see fit (pay it off, continue to pay the mortgage, sell it).

There is a reason banks and finance companies push credit life.....its a helluva deal.......for them.

[Rusty Shackelford 414]

If an estate has no property, or only exempt property, the creditors pound sand.

That’s the assumption I was making in the case of the girlfriend not needing to worry about her family making her car payment if she died.

[Bat Guano 363]

22 minutes ago, Rusty Shackelford said:

 

That’s the assumption I was making in the case of the girlfriend not needing to worry about her family making her car payment if she died.

Yeah, the salesman didn't get into the details; he was trying to add a profitable line item to his sale.