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What Happens To My Debt When I Die



Do you wonder about what happens to your credit card debt, mortgage, or personal loans after you die? It is a common question, and there are different answers that are dependent upon how the debt is assigned.

Debt Only in Your Name

You alone are responsible for any debt accumulated under your name. If you took out a car loan and had no co-signers or other parties on the loan when you die, no one else can be held responsible for that debt. Typically, what happens is a family member or loved one simply mails a copy of your death certificate to the debtor, and your debt is absolved. If collection agencies continue to harass the family of a deceased person about debt that was held only in the deceased's name, that company can be reported; family members of a deceased person are not held liable to pay off their solely-owned debt.

What if I Have an Estate?

Individuals who die and leave behind an estate are treated a little differently. In the instance that there are any assets left behind, such as a home, stocks, a savings account, then creditors can seize those assets in order to cure a debt. Even in the instances where a will is involved and property is left to a loved one, creditors must always be paid off first, and the benefactor will receive anything that is left over.

What About Co-Signers?

Situations that involve a co-signer are different as well. For instance, let us look at the example of a husband and wife who co-signed their mortgage loan. If the wife dies, the husband carries on with the mortgage just as before and nothing changes. In the event that there are debts left behind, the creditors would not be able to go after the home because it is now owned solely by the husband. However, the bill collectors can go after any estate that might have been left behind.

Each state has different laws and different statues of limitations regarding these types of situations. The best thing to do is to sit down with an estate planning lawyer to help you understand your state's laws and how best to prepare and protect you and your family.