When you pass away, your assets get divided up and passed onto your heirs. What happens to your debt though? That can be a complicated question to answer. There are different types of debt and some creditors and lenders may have to be addressed in different ways. A Des Moines estate planning lawyer can help you with the specifics.
Does My Debt Need to Be Paid After I Die?
Many types of debt do need to be paid after you have passed away. Your estate will be responsible for addressing liabilities like:
- Student loan debt
- Credit card debt
- Taxes
- Car loans
- Mortgages
It is especially important to pay off secured debts, like car loans or mortgages. If those are not paid off any collateral associated with them, like your vehicle or home, can be seized and sold by the lender.
It’s also important to note that different types of student loans can have different rules. Any federal loans taken out are likely to be forgiven upon death. Private loans are usually a different story though.
Who Is Responsible For Paying Off This Debt?
Creditors will likely come after your estate if you owe them any debts. The person who should be responsible for addressing these debts is your executor. They are there to manage all of the affairs of your estate and honor your last wishes, so this task falls to them as well.
They have to file taxes for you for the last time and pay off any liabilities. Then they will address any creditors through the probate process. As your assets go through probate, credit card companies, mortgage lenders, and others may make it clear that they are owed money from your estate.
What If My Estate Doesn’t Have Enough Money?
If your estate does not have enough money to cover your debts, then what happens next is largely up to creditors. In some cases, a credit card company or lender might decide that going after a debt is not worthwhile and just write yours off. If there is a secured debt like a car loan, then that car would be sold off and the lender would recover money that way.
Just keep in mind that if your estate doesn’t pay the debt and there is an opportunity to pursue someone else, a creditor is sure to take it. So if you have a joint credit card or someone co-signed a loan with you, the creditor is likely to find out and try to squeeze that money you owed out of your friend or family member.
Meet With Our Attorneys
If you want to learn more about how you can make an estate plan that makes it easier to address any outstanding debts, contact Herting Law, PLLC. We can help you make a plan that gives your family peace of mind.
