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Bankruptcy FAQ

What happens if you die in debt?

On Behalf of | Aug 28, 2019 | Credit Card Debt

Many people feel like they’ll be in debt until they die. Indeed, nearly 75 percent of people die with some debt. Let’s look at what happens to your debt when you’re no longer around.

A person’s debts need to be paid from their estate before any of their assets can be disbursed to heirs and beneficiaries. If you die with more debt than assets, your estate will likely be depleted, with nothing left for your family or others. There are, however, some types of assets that creditors can’t claim, like life insurance policies.

What about the amount of debt that your estate can’t cover? The good news for family members is that they probably won’t be responsible for it unless the credit cards and/or loans are in their names as well or if they’ve co-signed on a credit card or loan with you. Someone who’s only an authorized user on a credit card, however, won’t be responsible for the debt.

If, however, your credit cards are in both your and your spouse’s names, your surviving spouse will continue to be responsible for the payments after you’re gone. The same is true with loans or lines of credit.

Unfortunately, that doesn’t always keep creditors or collectors hired by them from going after surviving family members to try to collect debt. They typically don’t have a right to collect from them, but they know how to convince people that they do.

When it comes to paying debts from an estate, secured debts typically must be paid first. These are debts secured by something like a home or car. The next obligation is generally administrative and legal fees. Following that are unsecured debts. This includes credit cards. The executor of the estate is responsible for handling all of these payouts before distributing what is left (if anything) of the estate.

If you’re concerned about how much debt you have, and you don’t want it to deplete your estate or leave your spouse saddled with it, there are ways that you can get relief from some of that debt. An experienced attorney can offer suggestions and guidance.

Attorney Advertising Disclaimer: Under Federal Law, we have been designated a Debt Relief Agency and we help people file for bankruptcy relief under the Bankruptcy Code. This information is not intended as legal advice and no attorney-client relationship is created. Results may vary. Results not guaranteed. Dramatization: Not actual clients in pictures and videos. — Thomas C. McBride, attorney in Alexandria, LA.