Here’s Why a Person’s Debt Doesn’t Go Away After Death

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Spouses may be held responsible for the debt. 

Say a relative passes away with debt. You’d want to know how responsible you are for paying off credit card debt, mortgages, etc. Chances are, it’s not your problem. But even after a person dies, the ghost of unpaid finances lives on in creditors, who want their money back.

A person’s debt doesn’t go away after death, vanishing into the financial ether like a bad dream. Rather, it lingers. Creditors typically take what they’re legally owed from the deceased’s estate.

Debtors collect debt from the estate

When a person dies, they may leave behind money or property, known as the estate. Assets flow from the estate to creditors to pay off debts. The rest goes to beneficiaries. State law determines who gets what, and an estate executor coordinates payments, inheritance, etc.

Some examples of what may be included in a person’s estate are:

PropertyBank accountsRetirement and investment accounts

All may be liquidated to pay off debts. Sometimes, more is needed to repay debts fully. In most cases, that means the debtors just don’t get paid. They lose money, and that’s that. But there are exceptions to this rule.

You can choose to take over debt

Secured debt, or debt secured by collateral (like auto and mortgage loans), may be taken over by beneficiaries. A beneficiary may want to keep the house if a family member passes away. They can gain ownership by repaying the loan fully or taking legal responsibility.

Taking over secured loans is optional. Should beneficiaries choose not to take over secured debt, debtors will take what they need from the deceased’s estate. Creditors may sell the house or the vehicle to pay off secured loans. What’s left goes to beneficiaries.

You can inherit debt

In some cases, you can inherit debt. State law may hold family members, friends, or coworkers responsible for the deceased’s debt if any of the following is true:

You jointly own an account.You cosigned a loan.You’re the deceased’s spouse and live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin) or if you live in Alaska and have signed a community property agreement.

If any is true, you may be held liable for repayment by state law. For example, if someone dies in California, the state would have the spouse responsible for repaying any remaining credit card debt. The state would not make the children of the deceased responsible, even if they were authorized users of the deceased’s credit card.

Spouses may also be held responsible for leftover medical debt, which can pile up during the end of a loved one’s life. An estate lawyer can help sort through any confusion regarding inheritance. An attorney can also help you determine how to deal with debt collectors, who are limited in how they contact and treat beneficiaries by law.

Communicate with family members

If a family member anticipates passing away, they may have organized their assets in an easy-to-access place, including account numbers and passwords. They may also hold a life insurance policy with you as a beneficiary, which you can put toward paying down debts.

Families concerned for their beneficiaries may want to dig deeper into what happens to debt when you die by doing independent research or contacting an attorney. Knowing they’ve done all they can to prepare their loved ones may bring them peace of mind.

How to pay off debt fast

Folks haunted by the specter of debt might find solace in tried-and-true debt payoff strategies.

For example, finance guru Dave Ramsey advocates for the counterintuitive debt snowball method, which has you pay off debts from smallest to largest. Another option is the debt avalanche method, which has you pay off debts with the highest interest rates first.

A good debt payoff app can help calculate how long it will take to pay off debt and give you a window into how much you owe, all in one place. The faster you pay off debts, the less you’ll owe over the loan’s lifetime.

Debt doesn’t go away after death. In some cases, you can even inherit debt. Don’t be afraid to enlist legal help where necessary — death is messy, it’s emotional, and it’s perfectly normal to request assistance with paying off or organizing finances.

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