The majority of adults in the United States have some form of debt. This can be because they needed extensive medical care, got a mortgage to buy a home, took out a loan for a car or made purchases on a credit card. One question that some people don’t think of is what happens to that debt when the person who has it dies.
Generally, debts don’t die with the account holder. Instead, those creditors can make claims through the estate. The executor would liquidate assets to pay off the debts. If there are no assets to liquidate, the debts remain unpaid because of the insolvency of the estate.
Limited exceptions apply
In very limited circumstances, debts don’t pass through the estate – for example, if there’s a joint account holder or a cosigner on the account. In both of those cases, that individual would become liable for the debt and account holder dies.
There’s also a chance that the estate won’t be responsible for the debt if it was a secured debt. In that case, if the debt can’t be paid, the creditor has the option of taking the item that secured the loan. This is done through foreclosure on a home or repossession on a vehicle.
Loved ones usually aren’t liable
There are times when debt collectors may try to collect the debt from close relatives of the decedent. Anyone who was not a joint account holder or cosigner for the debt should direct the creditor to the executor. They should never give out their own personal financial information.
Taking care of the estate’s debts must be done in a specific order that’s set by law. This is only one of the duties that the executor has. Anyone who is responsible for fulfilling the estate administrative duties should ensure they understand them, which may require experienced legal guidance.
