What Happens To Your Debt When You Die?

Debts, especially big ones that it is extremely hard to pay, are risky. It could lead you to the worst point of financials, bankruptcy.

However, there is a worse thing than leading yourself to bankruptcy. Leading your loved ones to bankruptcy.

What Happens To Your Debt When You Die?

The debt you have does not disappear when you die. The debts under your name could be paid by your properties or estates that you own.

Anything could be used to pay off your debts after your death. But, if your debt is not paid even after your estates, these debts will inherit by your next of kin.

However, not every type of debt is inheritable; some debt stays as it is and vanishes since it is not inheritable1.


What Kind of Debts Is Inheritable?

There are several types of debts that are inheritable, and it is important to note that majority of debts are inheritable; only small and extremely common debts are not inheritable.

Co-signed loans

If you co-sign a loan, you have to pay that loan even if the other party is not able to, in situations like debt.

So, when you die, this debt will go to the other co-signing party or to your next of kin if both of you are unable to pay it.

Community Property States

Some states (like California, Arizona, Idaho, and six other states where you can find the rest on the internet) have community property laws where you have to pay every bit of debt that your spouse took out during your time of marriage; even the personal loans will be under your name if your spouse passes away.

Credit Cards

Credit card loans are tricky because even though they are inheritable, there are cases where the debt just gets written off.

If you have a joint account holder, they will be responsible for paying it, if there is no one associated with the account, your estates will cover it, but in the case when your estates cannot cover it, too, the debt will be written off.

Read: 10 Best Debt Relief Companies For Credit Card


What Can Creditor Take as an Estate?

Read: What Is Debt Management?

First thing, you have to notify the creditor of the death of the debtor. Then, the creditor submits a claim for the dead person’s estate for their debt.

However, there are limits as to what the creditor can take as an estate.

They can take anything besides your life insurance benefits, retirement accounts, and any amount you have in living trusts.


The Verdict

What happens to your debt when you die is extremely tricky and also risky for your spouses because if your estates cannot pay off the debts you have, your spouses will most likely have to take care of those debts, which could create massive problems for them financially in case of the debt being extremely high.

However, not every debt is inheritable, and some of them could get written off if there is no one or nothing that they can take, like credit card bills.


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  1. https://www.consumerfinance.gov/ask-cfpb/does-a-persons-debt-go-away-when-they-die-en-1463/#:~:text=Generally%2C%20the%20deceased%20person’s%20estate,debts%20of%20someone%20who%20died[]

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