What happens when death takes a loved one, while on a holiday overseas? For the survivors back home, the tragedy can be emotionally and financially catastrophic - so bad, in fact, that the matter has come under congressional study.

Some of the tales documented by the bereaved could fill a horror portfolio. Stories include: ill-prepared remains being shipped back to this country; delays of from weeks to months in shipment of bodies because of bureaucracy and red tape; exorbitant charges that put bereaved families on the brink of financial ruin.

This year about 10,000 Americans are expected to die on foreign soil, according to the American Council of Life Insurance. Of that number, the council said, most of the deaths will be among the 1.3 million Americans now living abroad, but a goodly number will also be tourists.

When a U.S. citizen dies in a foreign country, officials of that country notify the U.S. embassy or consulate there. They, in turn, forward the information to the State Department in Washington, which notifies the next of kin. The family then is faced with several decisions that must be made quickly, according to Edward C. Johnson, who with his wife Gail is a consultant on international affairs for the National Funeral Directors Association.

The family must decide whether the body should be returned to the United States or be cremated and the remains returned, or whether the body or cremated remains should be buried in the country where the death occurred.

According to the Johnsons, who are funeral directors in Chicago, prices for shipping the body back to the United States vary from $2,100 to $4,500 depending on where the death occurred and the cost of preparing the body. The air freight alone is pretty sleep because a heavy zinc-lined casket normally is used. The preparation fees also are high, especially when it comes to embalming, since this is not practiced in most countries.

The preparation and shipping fees have to be paid immediately, and can put a horrendous financial strain on a family. U.S. life insurance companies will pay death benefits upon receipt of an official death certificate, but because of delays by local authorities abroad and overseas mailing difficulties a family might wait weeks or longer before the necessary documents arrive.

The family may encounter other heart-rending problems, depending on where their loved one died, according to Sen. John Glenn (D-Ohio). In some parts of the world, he said, communications are slow and interment laws so strict that bodies are buried by the time the family hears about the death. The exhumation and return of the body are problems, because some countries will not allow a body to be exhumed for six months or more.

The State Department is preparing a study of this problem that is scheduled for presentation to Congress at the beginning of next year. Glenn, a member of the Senate Foreign Relations Committee, called for the study after one of his young constituents died in France.

The youth, Thomas Malone of Ashland, Ohio, collapsed and died of an apparent heart attack. He was a medical student at Montpeller College in France. The Malones received a telegram a day after their son's death. It listed the options and the costs for the disposition of the body - $3,000 for the body to be returned to the United States, $1,500 for cremation and the return of the remains, $1,000 for burial in France.

"The telegram I got from our government absolutely shocked me," said the youth's mother, Colista Malone, who alleged that the American consulate in France and the State Department were callous and insensitive to the family tragedy.

The financially strapped family couldn't afford to bring their son's body home. However, family friends and others who heard of the Malones' plight raised to $3,000 and the youth's body was brought back to the United States for burial.

The family suffered great anguish and unnecessary hardship," Glenn said. "There just wasn't any way, under existing laws, that they could be helped."

Glenn notes that with travel overseas increasing, the scope of the problem will probably grow. "My (proposed) legislation requires the State Department to develop a program for the fast and humane return of the deceased American back to the United States."

However, it will be no easy matter. Among other things, to be universally acceptable, it will have to be approved by every nation an American travels to - just about every country on the globe. One proposal, to establish a passport insurance policy by hiking the passport fee, would guarantee payment for the return to the United States of the remains of any American who dies abroad. It has already been shelved for a number of reasons, including that it would be too expensive.

Until a solution is found, the Life Insurance Council suggests that travelers make arrangements with their families before departing, so that in the event of death the next of kin knows what to do and the life insurance agent can act quickly to process the necessary paperwork.

The National Funeral Directors Association has a leaflet, "Death of American Citizens Abroad," which contains advice and procedures. You can get a free copy by writing to Edward C. Johnson, National Funeral Directors Association, 2681 North Orchard St., Chicago, Ill 60614.