Many people wonder what happens to a person’s debts when they die. The answer to this isn’t the same in every situation. Instead, it’s necessary to look at the specifics of the case to determine how the debt is handled.
If the debt is secured, which includes homes and vehicles, the debt will have to be paid off or the asset can be repossessed by the creditor. This would mean that a home would go through foreclosure if the debt is unpaid.
Co-signers and joint account holders
Debts that have co-signers or joint account holders transition to the sole responsibility of that party. This means that individual will have to pay for the debt.
Individual debts
There may be some debts that were the sole responsibility of the decedent. These become the responsibility of the estate when the person passes away. The creditor has to make a claim against the estate and the administrator pays the debts submitted in accordance with the law. If the estate doesn’t have the funds or assets to cover the debts, those debts must be written off.
Rights of beneficiaries and heirs
Heirs and beneficiaries typically aren’t required to pay these debts as long as they aren’t the joint account holders or co-signers; however, unscrupulous creditors may still try to collect. Those individuals shouldn’t ever provide their personal or financial information. Instead, they only need to direct the creditor to the estate administrator.
Because debts after death can sometimes be a complex matter, it may be beneficial for heirs and beneficiaries to have someone on their side who’s familiar with these matters.