Where Does Your Debt Go When You’re Gone?

Any kind of debts you leave when you pass away can eliminate the assets that you had hoped to leave to heirs. Sometimes, member of the family might also be on the hook of your debt. Many individuals buy life insurance policy not just to leave something behind for their beloved ones but also to aid deal with any kind of debt and also last expenses.

Your debts become the obligation of your estate after you die. Your estate is every little thing you owned at the time of your death. The procedure of paying your costs and also distributing what remains is called probate.

The executor of your estate, the individual responsible for handling your will and estate after your death, will certainly use your properties to repay your debts. This can suggest creating checks from a bank account or selling home to get some cash. If there are no sufficient means to cover your debts, creditors generally are out of good luck.

On the other hand, particular types of debs can become other people’s burden.


If there’s a joint homeowner or if someone inherits your house, this person will be responsible for your debts. Yet federal regulation bars lenders from forcing a joint owner to repay the mortgage instantly after the death of the co-owner. If there’s no joint property owner, the executor can pay the mortgage out of the estate. If there’s not enough money in the estate, a family member who inherits the house can simply take over the mortgage payments.

Home Equity Loan

The same goes for a home equity loan if somebody inherits it. A lender can require him/her to repay the loan instantly, which might imply selling the house. That said, lenders may work with new owners to let them simply take control of the settlements on the home-equity loan.

Credit Cards

If the estate runs out of assets to pay bank card balances, credit card companies run out luck due to the fact that this debt is not secured by properties the way mortgages and car loan are. Yet any type of joint account owner would be accountable for the unpaid bills. Individuals that are simply authorized users of a credit card are exempt for paying the balance.

Car Loan

The executor can also pay the car loan out of the estate. If payments stop, the loan provider can repossess the automobile. If the estate can not repay the car loan, whoever acquires the car can just proceed paying as well as the lender is unlikely to do something about it.

Student Loans

The estate must pay off personal student loan debt, however lenders have no choice if the estate does not have possessions to settle unprotected debts such as student loans. But, co-signers of private student loans will be in charge of remaining debt. Some lenders might even forgive the debt upon death, but this is not typically the case. To make sure no one will be responsible for your student loan after you pass, it’s best to use federal student loans since they are discharged upon your death. If a student’s parent has a federal PLUS loan, it will be discharged upon the death of either the parent or student.

If you need assistance with planning your estate, asset protection, or other elder law issues, contact the dedicated and skilled Chattanooga estate planning attorneys at the McKoon, Williams, Atchley & Stulce, PLLC.