When a loved one passes it is the hardest time of the families lives. They are trying to figure out what their world looks like without that person. Most Americans carry around some form of debt. That can be personal loans and credit cards, mortgages, or medical debt. The last thing on anyone’s mind is trying to settle that debt for the deceased person. Unfortunately, a person’s financial responsibilities do not vanish after they pass away.
The creditors have the right to collect their money back and can even file claims in probate court to sort out the debt. If one of the heirs tries to bypass probate and not use the estate to pay back the debts, then they can be sued by the creditors. Getting a probate lawyers can be the first major step towards reconciling the debt and allowing the entire process to go over more smoothly. If a representative, executor, or administrator was named by the deceased then they are responsible for paying off the debt. Getting legal advice can let you know the rules to what you are responsible for as the survivor. For example, if a child passes then the parents would be responsible for the medical and hospice care debt. If a spouse dies, then the other spouse would be responsible for the same. If any of the loans are cosigned together or any accounts with a debt are joint accounts, then the other person takes on the full financial responsibility for that debt.
In general, the estate should be worth enough to cover the debt. The estate is the total worth of all the deceased assets. This can vary greatly depending on the situation they left behind. If there was a paid off house or multiple large retirement funding accounts left then there will be no issues paying off smaller debts once everything is settled. However, if the financial situation was not as strong then there could potentially be not enough in the estate to cover all the debt. This is why life insurance can be so important to have. When someone passes it is not just their existing debt that gets passed on, but it is also their funeral costs which can be added on top. Today we see a ton of go-fund me pages pop up on Facebook because another person has passed away while uninsured. Life insurance allows for the payment of the funeral to be paid in full and if the policy is large enough then they can even leave behind extra money to go towards a kids college fund or pay off those existing debts.
When someone passes you generally won’t have debt collectors immediately knocking on your door and ringing your phones. There are in most states laws in place that allow the creditors three to six months to place a claim in probate court. Some mistakes do happen and this can be seen from the creditors not being notified of the persons death. It is important to take you time and notify all the correct people to ensure that the process can go over smoothly, and you can focus on the memory of your loved one.
