In most cases, a person’s debts do not disappear when they pass away. Those debts are owed by and paid from the estate of the deceased person. Family members are usually not required by law to settle a deceased relative’s debts with their own money. If the estate doesn’t have enough money to cover the debt, it usually goes unpaid. There are, however, exceptions to this rule. If you do any of the following, you may be personally liable for the debt:
- are the spouse of the deceased person and live in a community property state like California
- are the surviving spouse of a deceased individual, and live in a state that mandates you to pay certain types of debt, such as some healthcare costs
- were legally liable for the estate’s resolution and failed to observe certain state probate regulations
Consult a lawyer if you’re unsure whether you’re legally obligated to pay a deceased person’s debts with your own money. You may be eligible for free legal assistance from a legal aid agency near you, depending on your income.
Who can pay debts out of the deceased person’s assets?
The executor is responsible for paying the deceased person’s debts. The executor is the person named in a will to carry out the terms of the will following the individual’s death.
If there is no will, the court may appoint an administrator, personal representative, or universal successor to the estate and grant them authority to settle the estate’s issues. In some states, that authority might be delegated to someone not chosen by the court. State law, for example, may set a different method for someone to become the executor of the estate even if the court hasn’t formally appointed them.
Can a debt collector talk to a relative about a deceased person’s debt?
The law protects persons, especially family members, against debt collectors who engage in abusive, unfair, or deceptive debt collection activities.
Collectors can contact the deceased person’s family and discuss outstanding debts under the Fair Debt Collection Practices Act (FDCPA).
- If the deceased was a minor child (under the age of 18), the parent(s) must be notified.
Collectors can also approach anyone with the authority to pay debts with assets from the estate of a deceased person. Debt collectors are prohibited from discussing a deceased person’s debts with anybody else.
If a debt collector contacts a deceased person’s relative, or another person connected to the deceased, what can they talk about?
Collectors can get the name, address, and phone number of the deceased person’s spouse, executor, administrator, or other person with the power to pay the deceased person’s debts by contacting other relatives or people connected to the deceased (who don’t have the power to pay debts from the estate). Collectors can normally only contact these relatives or others once to obtain this information, and they are not allowed to discuss the debt facts.
Collectors can contact the relative or other person again for updated information, or if the relative or other person provided incorrect or incomplete information to the collector. Even then, collectors are prohibited from discussing the debt.
If I have the power to pay a deceased person’s debt, can I stop a debt collector from contacting me about the debt?
Yes, you have the legal right to stop a collection agency from contacting you. Send a letter to the collector to accomplish this. A simple phone call is insufficient. Tell the collector that you don’t want to hear from them again. Make a copy of the letter for your records, then send the original by certified mail with a “return receipt” to prove that the collector received it.
However, even if you cease talking with collectors, the debt will not go away. The debt collectors may still try to collect the debt from the estate or anyone who falls into one of the above categories.
Does debt go to next of kin?
Unpaid debts do not simply vanish when someone passes away. It becomes a part of their personal property. Except when they own the loan, family members and next of kin will not inherit any of the outstanding debt. As a result, they can be a crucial component of estate planning.
Do debts get written off when someone dies?
When someone dies, their ‘estate’ is used to pay off their debts (money and property they leave behind). You’re only liable for their debts if you had a joint loan or arrangement with them, or if you supplied a loan guarantee; you’re not automatically liable for the debts of a husband, wife, or civil partner.
Can family members inherit debt?
Losing a loved one is a particularly tough experience. While money is likely the last thing on your mind as you grieve, it’s critical to understand how the assets and obligations left behind will affect you and others.
The majority of the time, a person’s debt is not passed on to their spouse or family members. Instead, the estate of the deceased person is usually responsible for paying off any remaining obligations. In other words, the assets they had at the time of their death will be used to pay off the debts they had at the time of their death.
It is conceivable to inherit debt if their estate is unable to satisfy it or if you jointly held the loan. State laws on inheriting debt differ, but assets can be protected from creditors if certain precautions are followed, such as establishing a living trust.
Who is responsible for credit card debt after death?
Before any assets are handed to your heirs or surviving spouse, any debt you leave behind must be settled. Debts are paid from your estate, which is the total of all of your assets at the time of your death. Your estate’s assets are used by the executor to pay off your outstanding debts. The executor may be someone you named in your will or estate plan, or someone appointed by probate court if you don’t have a will or estate plan.
Your estate is insolvent if you have more obligations than assets. Whether your credit card debt must be paid by family members in this circumstance is determined by a number of variables.
After you die, anyone who is a joint account holder on your credit cards may be held liable for the debt. Joint account holders apply for credit cards as cosigners or co-borrowers, and the credit card provider looks at both applicants’ credit reports before choosing whether or not to extend credit. The credit card amount must be paid in full by both account holders.
These days, just a few big credit card firms provide joint accounts. If you and your deceased spouse shared a credit card account, it’s more than probable that one of you is an authorized user on the other’s account. (If you’re not sure which group you fall into, call your credit card company.)
You obtain a credit card in your name for the account as an authorized user, and you can use it to make purchases and payments. The principal account holder, on the other hand, is ultimately responsible for the credit card amount. If you’re an authorized user on a deceased person’s account, you’re normally not compelled to pay the outstanding sum.
However, there is one important exception: community property states often make spouses liable for each other’s obligations. Even if you were only an authorized user or the credit card was completely in their name, if you live in a community property state, you may be obligated to pay your spouse’s credit card obligations after their death. Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, while Alaska allows spouses to declare their property community. Because laws differ from one community property state to the next, if you live in one of these states, find out what your responsibilities are by consulting an attorney who specializes in estate law in your state.
Do I have to pay my deceased husband’s credit card debt?
The majority of the time, the answer to this question is no. In most cases, family members, including spouses, are not liable for their deceased relatives’ debts. Credit card debts, student loans, vehicle loans, mortgages, and company loans are all included.
Rather, any outstanding debts would be paid from the estate of the deceased person. As a surviving spouse, this means you won’t be responsible for paying anything toward the loan individually. Your spouse’s assets, on the other hand, could be used to pay off loans or other debts they’ve left behind.
Following your spouse’s death, a debt collector may contact you to confirm who they should contact about debt recovery. The executor of the estate is usually the person in charge of this. If your spouse had a will, it’s possible that they named an executor in it. If they don’t want you to be their executor, you can file a petition with the probate court.
Inventorying the deceased person’s assets, estimating their value, notifying creditors of their death, and paying any outstanding bills are all important aspects of the executor’s job. When there are no cash resources available, such as a bank account, the executor can liquidate assets to pay creditors.
What happens when someone dies with debt and no assets?
If you have any credit card accounts with a co-owner, the co-owner is responsible for any account balance.
Keep in mind that a joint owner is not the same as an authorized user who has access to your credit card. Your credit card debt is not the responsibility of an authorized user. If you only have credit cards in your name, the credit card companies can file a claim with your estate to be compensated.
“The debt will die with the debtor if there is no estate, no will, and no assets—or not enough to satisfy these debts after death,” Tayne explains. “Children or other relatives have no obligation to pay the debts.”
Can your parents debt passed you?
Unless you co-signed for the loan or applied for credit with the person who died, you won’t be able to inherit debt from your parents.
How long do creditors have to collect after death?
Notifying potential creditors of an individual’s death is a required step in the probate procedure in California. In order to file a probate claim in California, the executor of an estate must:
Creditors have 60 days from the moment an estate executor informs them that the estate is in probate to bring a claim. Creditors have four months to act after an estate representative is appointed by a California probate court if the decedent did not name an executor in their will or trust.
While creditors are given first priority in claiming a decedent’s assets, heirs cannot be held financially liable for the obligations of the deceased. Creditor claims are handled by the estate of a deceased person, not the heirs.
What happens to bank account when someone dies?
Closing a bank account when someone passes away is a difficult task. The account will be frozen by the bank. The executor or administrator will need to request that the cash be released; the amount of time it takes will depend on the amount of money in the account.
Can creditors go after beneficiaries?
To pay off debts, creditors can’t usually go after assets like retirement accounts, living trusts, or life insurance payouts. These assets are distributed to the named beneficiaries and are not included in the probate process.
What happens to debt when your spouse dies?
When your spouse passes away, their debt is left behind, but that doesn’t mean you have to pay it. A deceased person’s debt is paid from their estate, which is essentially the sum of all of their assets at the time of their death. If your spouse has a will, the executor specified in the will is in charge of paying creditors from the estate. If your spouse died without leaving a will, a probate court judge will decide how their assets should be distributed and appoint an administrator to carry out those decisions.
In general, you are not liable for your spouse’s debts unless you had a joint credit account (which is different from being an authorized user on your spouse’s account); cosigned for a loan, debt, or account; or resided in one of the nine community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin). (Alaska residents have the option of signing a special agreement to pick common property.)
In most places, spouses are jointly and severally liable for each other’s debts. However, rules range from one state to the next when it comes to community property. Consult an attorney versed with estate law in your state if you’re not sure what the law needs.
If you signed or cosigned hospital admission documents or medical treatment authorizations, you could be liable for any medical bills your spouse has that their insurance does not cover. This is determined by the laws of your state and the paperwork you signed.
Will you be required to hand over the proceeds of your spouse’s life insurance policy or access their retirement account to pay the bills if their assets at the time of their death don’t cover their debts? Certain assets, such as life insurance policies, retirement plans, brokerage accounts, and assets maintained in a living trust, are safeguarded from creditors and cannot be used to settle debts after a spouse passes away. Otherwise, the estate executor or probate administrator will prioritize creditors and disburse payments according to your state’s probate regulations until the money runs out. Some creditors will not be paid if there is not enough money to pay all of the bills.
