Losing a loved one is a challenging time that’s filled with emotions and a need to take care of their final affairs. One question that often comes up is what happens to the debts they have.
A person’s debts don’t automatically get forgiven when the person dies. Because of this, it’s critical that loved ones know exactly what should happen to these debts and how creditors should handle the situation.
Do loved ones ever have to pay a decedent’s debts?
When someone passes away, their debts become the responsibility of the estate. That means any assets left behind, such as bank accounts, property or investments, may be used to pay off outstanding obligations.
There are exceptions to the assignment of debts being placed on the estate. If someone co-signed a loan or was a joint account holder, then they may be liable for that debt. Secured debts, like a mortgage or car loan, may result in the loss of the asset if payments stop. If the estate doesn’t have enough assets to cover everything, remaining unsecured debts often go unpaid.
What should loved ones do if they’re approached for payment by a decedent’s creditors?
It’s not unusual for family members to receive calls or letters from debt collectors after someone dies. The most important thing to know is that you’re not personally responsible for a deceased loved one’s debt, unless you’re a co-signer or a joint borrower. Creditors may still try to collect from others, even if there isn’t a legal obligation to pay.
Anyone who’s contacted by a creditor to pay a decedent’s debts should direct them to the estate administrator. Never give out any personal or financial information to them.
Anyone who’s handling estate administration should ensure they understand their duties, including how to handle creditor claims. Seeking the assistance of someone familiar with these matters may be beneficial in these cases.