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What Happens to a Debt after Death?


Many people die with debts. This shouldn’t be too surprising. If a person uses a credit card, then they probably will carry a balance when they die. There may be other loans, like personal loans or car loans. And many people need medical care to treat an end-of-life illness or injury. You can expect the hospital to send bills and expect payment.

What happens to these loans when the debtor dies? Many people who ask this question are family members who are afraid that they will be responsible for the debt. The good news is that you probably won’t be. Instead, the estate should pay all debts.

When Might a Family Member Be Responsible?

There is one situation where you could be on the hook for a debt—you have a joint debt with the person who died. Essentially, your name is on the loan document, so it is every bit as much your debt as it was the person who died. For example, if you have a joint credit card with your spouse, you will be responsible for the debts after death.

The Estate Pays the Deceased Person’s Debts

If the debt was only in the deceased person’s name, then the debt belongs to his or her estate. The estate will need to pay the debt as part of probate.

Each person who dies has an estate that consists of the assets and property they owned when they died. These assets will be used to pay any of their debts. The estate’s personal representative will need to publish a notice to creditors in the newspaper, explaining that the decedent has passed. All creditors will need to make a claim on the estate within a certain amount of time so that they can get paid. If they miss the deadline, they are usually out of luck.

Here is an example: Frank dies with $750 on a credit card and another $1,250 on a personal loan, so the estate needs to pay $2,000. If the estate has $2,000 in cash, then the personal representative can use that money to pay the debt.

However, if the estate doesn’t have enough cash to cover debts, then the personal representative will have to sell assets to raise the money. This step is rife with complications. What assets should the representative sell? Remember, people are expecting to inherit property, and selling something could anger the beneficiary who anticipated receiving the gift.

As a personal representative, you can’t exhibit favoritism of some beneficiaries over others, so you should meet with an experienced attorney to help you decide which assets to sell.

Speak with a Probate Lawyer at Millhorn Elder Law Planning Group in The Villages

Paying debts is a key part of every probate proceeding. If you are serving as a personal representative and have questions, please reach out to an experienced attorney today.

At the Millhorn Elder Law Planning Group in the Villages, our estate planning attorneys have helped many people with probate and estate administration. You can reach us by calling 800-743-9732 today. We offer a free and confidential consultation.



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