Troubleshooting Legal Problems

What happens to debts when a person passes away?

Many people carry debt throughout their lifetime. One question that sometimes comes up is what happens to those debts when a person dies. The answer is that it depends on several factors. 

The loved ones of a person who dies should understand a bit about what happens to those debts. This may help to save them some headaches and stress. 

How are creditors paid after a death?

In most cases, loved ones are not personally responsible for paying someone’s debts after they pass away. Debts are typically settled through the deceased person’s estate, which consists of their assets, such as property, money and other possessions. 

When someone dies, their estate will be used to pay off any outstanding debts before any remaining assets are distributed to heirs or beneficiaries according to the deceased’s will or state law.

However, there are some situations when someone might be responsible for the debts:

  • If they co-signed a loan or credit agreement with the deceased, they might be held responsible for repaying the outstanding balance.
  • If they are a spouse living in a community property state and the debt was acquired during the marriage, they may be responsible for the debt.
  • If they are the administrator or executor of the estate, they may be held liable if they distribute the assets to heirs before paying off the debts, but this liability is limited to the value of the assets in the estate.

Anyone who’s contacted about a loved one’s debts after that person passes away shouldn’t give their own personal information to the creditor. Instead, provide the information to the estate administrator. Never let the creditor bully you into paying for those debts.