Many people don’t have the opportunity to pay off all their debts before they die. As such, a question that may arise upon their death is what happens to those debts. Contrary to what some people believe, debts don’t always just vanish when an account holder dies.
Once a person dies, creditors can make a claim through their estate to get the payment that’s owed to them. The estate administrator handles this process by using funds from the estate or liquidating assets to cover the balances. If there’s not enough to cover the debts in the estate, the debts will remain unpaid and the creditors will have to absorb the loss.
Are family members ever liable for debts?
Family members are sometimes liable for debts, but these cases are limited. If an account was jointly held, the joint account holder is liable for the balance. A co-signer on an account would also be responsible for the debt. Spouses are sometimes required to pay debts, but they should seek assistance if they’re being asked to pay a debt if they weren’t named on an account at issue.
What happens to secured debts?
If there’s property attached to the debt, such as a home or vehicle, the property may be foreclosed or repossessed. The alternative is for the beneficiary who should inherit the property to assume the loan or find alternative financing for it.
Ultimately, anyone who’s contacted about a loved one’s debts after that individual passes away should direct the creditor to the estate’s administrator. The administrator is responsible for paying them off in a specific order, so they may benefit from seeking guidance about this matter as well.