Do debts die with the debtor’s death?

We discuss debts and how to get rid of them for long hours. , But we tend to overlook a vital question- If a debtor dies, what will happen to his debts? We, the lovers of life, dread the appalling thought of death. So we choose not to ponder what might happen to our debts if we die. But, considering the unpredictable nature of life, it is rational for you and your dear ones to learn when you are and when you are not liable for one another’s obligations.

Three questions will guide the debts of a deceased person

1. Did they have a will?

2. Were they married?

3. Did they live in a community property state?

If a person has a will, then after their demise, their property and debts will be handled by the executor as per the will. The executor will determine in which order the debts must be paid off. Usually, unsecured creditors are paid off if enough money is available from the property; they may not be paid at all if the deceased debtor was the sole open account user or sole signer of the credit application and their property is inadequate to satisfy the unsecured debts.

Suppose the dead person was a resident of a community property state. In that case, the debts he left behind will automatically become the responsibility of the deceased’s spouse, irrespective of whether there will or not. The spouse will assume responsibility even if they were not a co-signer on any account or agreement.

However, there will be some exceptions to this, if the deceased’s property is insufficient to pay off the secured creditors or if a large share of the property and funds value is in such things as a 40(k) retirement plan, a primary residence, brokerage accounts and some kinds of insurance.

If the dead person did not have a will and did not have a living spouse, then the state law appoints a close relative (son, daughter, mother, father, or a grandparent/grandchild) as the executor of the property. But, if there are no relatives, the state appoints an executor.

Cosigner’s Role

Anyone who had co-signed any loan or credit agreement (secured or unsecured) with the deceased person and the deceased had not paid off those obligations before demise, and then the co-signer will be obligated to pay off the debts. But often, the cosigner’s role is decided by the terms and conditions of the agreement and the creditor.

If the creditor thinks it is better to cancel the debt account after a cosigner dies, the creditor may do that. Also, the creditor can grant the living co-signer some time to look for a new cosigner. The creditor may also require the full payment of the obligation almost immediately after a cosigner’s demise.

Debt and Inheritance

Suppose a parent has bequeathed all their property and consumer debts to their children. In that case, the children will be legally responsible for repaying the debts before claiming their inheritance.

Things you should keep in mind

Mourning family members of a deceased debtor happen to be the most vulnerable victims of fraudulent creditors. Such creditors hoax the bereaved people into paying money they do not even owe. The death of a loved one is shocking, and the pain is overwhelming. The last you would want to do after their funeral is deal with and discuss finances.

Nevertheless, you should keep the following in mind and never let some scam creditor take advantage of your situation:

• Until you are sure you are liable for the repayment of the debt, do not send any money to a creditor.
• To have a clear idea about your obligations, ask your creditor to forward you the written documents that state the original purpose of the debt, your responsibility towards the debt, and the exact current amount of the debt.
• Consult an attorney to work an easy way out of the complexities entailed by the obligation. The death of a dear one is an irreparable loss; that goes without saying. But a massive financial loss due to the fraudulence of creditors can be a significant blow for you.

So, do not let your logic depart even at the most challenging times, and you can protect yourself against the deceit of unscrupulous creditors.