What happens to a deceased person’s debt?
Generally, a deceased person’s debt is paid off by their estate. In legal terms, estate refers to the person’s total assets, like their net worth. If the decedent (deceased person) had a will, a personal representative as declared by the will is responsible for distributing the assets accordingly. If the decedent did not choose a personal representative or didn’t have a will, then the court will appoint someone to handle the assets. In many cases, life insurance policies and retirement savings are not eligible to pay off the decedent’s debt. If there aren’t enough assets to cover all debts, property can be sold to make the payments.
Who else could be responsible for paying the debt?
If the decedent had credit card debt under a jointly held bank account, then the other joint holder is responsible for that debt. However, an account holder is not the same as an authorized user. An authorized user that has access to a deceased person’s bank account will not be held responsible for outstanding debts. Similarly, cosigners could also be held responsible if the decedent rented property, borrowed money, or had some other financial obligation that required a co-signer. In the event that the primary signer passes away and can no longer keep up with their financial obligations, the cosigner will need to handle those debts. There are very few types of debt that can be completely discharged after a person’s death. Federal student loans are dismissed if the borrower passes away. Private student loans depend on the agreement. To discharge federal student loans, a family member or personal representative must submit a death certificate as proof of death.
Can a debt collector contact me?
If a relative passes away and you are not their personal representative for their estate, then you are not responsible for settling the debts. If a debt collector tries to contact you on behalf of a deceased relative, then you can refer them to the personal representative. You do not need to speak to a debt collector. There are federal laws in place to prevent debt collectors from unfair collection practices, such as harassing borrowers. However, debt collection companies can file a lawsuit against a decedent’s estate. The personal representative must determine which debts are legitimate and the best route for paying them. If you are responsible for a decedent’s debt, speak to one of our Herting Law PLLC attorneys for trusted legal counseling.