What Happens to Your Debt After Death?

Written By Melissa Cook
Aug 22, 2018


What Happens Debt After Death?

We humans spend an inordinate amount of our lives worrying about death. Increasingly, Americans are concerned financially about their families after their demise. According to the Federal Reserve, leaving your family with big bills could be more of a problem now than ever: household debt recently hit a record high of $13.29 trillion. Everyone should be wondering the same question: Are debts like wedding vows—“till death do us part”—or will they haunt you and your loved ones from beyond the grave? 

First, let’s break down the process. Once a person has deceased, their loved ones are required to notify all creditors. Meanwhile, a court collects all the deceased’s assets and debts into one big entity, the estate. A procedure called probate occurs. This is when creditors have a chance to make a claim on the deceased’s assets. Once the probate period is over, whatever is left of the assets will be given to the family.

So yes, all debts that can be paid must be paid from your estate, so long as those creditors make a claim. However, in most cases, your creditors cannot go after your family members to pay outstanding debts. But they can significantly decrease—or eliminate—the amount your loved ones receive from your estate.

How these post-mortem payments function depends on the types of debt you have, your relationships, and even where you live. At Americor, we specialize in debt relief for first responders. As usual, Americor can explain it all below:

Secured Debts

Secured debts are debts that are attached to something of value, say a house or a car. If you still owe money on your home loan, the bank can file a claim for the remaining balance. If your estate doesn’t have enough cash to cover it, the bank can force the home to be sold and recover its money from the sale. The same goes for a car loan.

Unsecured Debts

Unsecured debts would include credit card debt, personal loans, and any other debts without some type of collateral against them. These bills also must be paid out of the estate, but if the estate comes up short there’s nothing these creditors can do. Credit card debt should not have to be paid for by relatives or spouses of the deceased unless they are co-signers on the loan. Creditors simply must eat the cost if there is not enough money from the estate to cover the cost.

Federal Student Loans

Federal Student Loans are a special debt category because—unlike any other personal debt—they disappear once you are deceased. According to the U.S. Department of Education, if the borrower of the federal loan passes, the loan automatically is cancelled, and the debt is discharged by the government. 

Spouses

The only complicated relationship here is your spouse. In some cases, creditors can pursue their remaining money from the spouse of the deceased. This boils down to whether you live in a Common Law or Community Property state. In most states, a person’s debts are theirs alone and—unless both partners are listed—those debts do not belong to their spouse. However, in Community Property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin, Puerto Rico, and [kind of] Alaska), spouses are treated as a unit in all matters, including debt.

So yes, your estate can be raided by your creditors. But no, for the most part your loved ones are safe. But the best way to secure your family’s future is to leave this world with as little debt as possible. Learn more about debt collectors and debt anxiety. Contact Americor, experts in debt relief options, today for a free consultation regarding your debt solutions or debt relief strategies.

See our article on how to live a debt free lifestyle

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Americor provides debt solutions to thousands individuals and families all over the country. We’re a next-generation debt relief company with a proprietary platform designed to help clients get out of debt quickly. Together we’ll develop a strategy for you to enjoy a debt free lifestyle. Learn more about how Americor can help relieve the burdens of debt today.

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We provide debt resolution services. Our clients who make all monthly program payments save approximately 40 – 50% of their enrolled debt (average of 43%) upon successful program completion, before program fees. Fees are based on a percentage of your enrolled debt at the time of starting the program and range from 15%-25% of your enrolled debt. Programs range from 20-48 months. Clients must save at least 25% of each debt due to an enrolled creditor before a bona fide settlement offer will be made. On average, clients receive their first settlement within 4-7 months of enrollment and approximately every 3-6 months thereafter from when the prior debt was settled. Not all Clients complete the program. Estimates are based on prior results and may not match your results. We cannot guarantee that your debts will be resolved for a specific amount or percentage or within a specific timeframe. We do not assume your debts, make monthly payments to creditors or provide tax, bankruptcy, accounting, legal advice or credit repair services. Our program is not available in all states; fees may vary by state. Some programs may be offered through The Law Firm of Higbee & Associates d/b/a Advantage Law. The use of debt resolution services will likely adversely affect your credit. You may be subject to collections or lawsuits by creditors or collectors. Your outstanding debt may increase from the accrual of fees and interest. Any amount of debt forgiven by your creditors may be subject to income tax. Clients may withdraw from the program at any time without penalty and receive all funds from their dedicated account, other than funds earned by the company or fees paid to third-party service providers, as may be applicable. Read and understand all program materials prior to enrolling. Certain types of debts are not eligible for enrollment. Some creditors are not eligible for enrollment because they do not negotiate with debt relief companies. To determine the offers you may be eligible for, Americor conducts a “soft credit pull.” This credit pull does not impact your credit score, creditworthiness, or ability to obtain credit from other sources. The soft pull is not a tradeline entry, it does not report against your score and will only take a few minutes.

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