Does Debt Disappear When A Person Dies?

Some people assume when a loved one passes the money that person owes to creditors is eliminated. That is not always the case and for some, the debts of a deceased loved one results in the loss of a large portion of that person’s estate. Whether or not a debt is still in place after death varies based on the type of debt and who is responsible for that debt, so if you are concerned about your estate or the estate of a loved one, it is important to consult someone experienced with estate law.

Individual Debt

If a debt is in the name of the deceased only, it is only that person who can be held accountable for the money owed. After a person dies, a surviving loved one or attorney can mail a copy of the deceased’s death certificate to the creditor and the debt is absolved. Creditors are not permitted to harass the family of a deceased person to collect on a debt, unless they are trying to recover a debt that was shared with someone else.

What permits debt collectors to receive payment for their debt is if a deceased person leaves behind an estate. Creditors might have the ability to seize assets from an estate in order to settle a debt. Some people assume a will divvying up their assets among the living can keep these things from creditors, but this is not the case. Creditors must be paid first and the remaining assets are then distributed per the terms of the will.

Shared Debt

When a co-signer is responsible for the debt of someone who has died, the co-signer remains responsible for the debt. Co-owned assets transfer into the name of the living person, so they are not accessible to creditors looking to recover a sole debt. For instance, if a married couple owns a home together and the wife dies owing money to a credit card company, that creditor does not have the right to go after the co-owned home as a means of collecting on the debt.

How Can You Protect Your Estate and the Well-being of Your Loved Ones?

The best thing anyone can do is make arrangements that are legally binding for after they have died. An experienced attorney can help you determine how best to manage your assets and how to create a will that ensures your loved ones receive as much of your estate as possible.

If you are ready to make final arrangements for your financial future or you are concerned about who will be responsible for your debt after you are gone, contact the legal team at Miller and Steiert, P.C.


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