Walker & Walker Can Help You With Bankruptcy
For many in Minnesota it feels like debt is something you just can’t escape. By the time you pay off a car, it is so old you need to buy a new one with a new car payment or to pay off one credit card, you have to use another. It is like a black hole in which you can’t find relief without intervention. However, if you are in deep debt, what happens if you were to unexpected pass away? Does debt follow you into your grave or does it spread out and infect your remaining family members?
What Happens to Debt After We Die?
There is really no good news about passing away, but it is relatively comforting to know that when you pass away, your debt will not be a burden to your loved ones. However, this doesn’t mean that all your debt will just dissipate either. If you have any assets, such as a house or savings or investments, those should go to pay the debt before they get inherited.
When you pass away, all of your assets go into something called an estate. The money in the estate then goes to pay the debts first, and then to your heirs. The first person who inherits unless there is a will which says otherwise is your spouse. If you are not married, your assets will all be lumped together in what is referred to as your estate. Your home, car, bank account, retirement accounts, and any asset to your name will be considered part of that estate. This estate will them be split among your living heirs.
Unfortunately, before your heirs can split that estate, the creditors have first access to it in order to settle the debts of the deceased. While some aspects of the estate, such as life insurance with a designated beneficiary, are exempt from creditors, much of the estate is not. In some cases of very large debt, there may be nothing left for the heirs. However, if the entire estate is depleted, the remaining debt will not be transferred to the heirs. It will instead remain unsatisfied.
What About Cosigned Debt?
When someone with a cosigned debt dies, then the cosigner continues to owe 100% of that debt. This is true even if the person who passed away was the primary borrower. Money lenders often do not fully explain what it means to cosign a debt. What it means is that both signers on the debt owe 100% of the balance. If one doesn’t pay it, then the bank or credit card company will pursue the other for it.
The most common types of cosigned debts are private student loans, car loans, and joint credit cards. Someone who is an authorized user on a credit card may also count as a cosigner. This depends on how the credit card company did its paperwork when the authorized user was added to the account. If a debt is listed as “joint” on a credit report, then both people are probably cosigners The best place to get credit reports is www.annualcreditreport.com.
You Don’t Have to Pay a Loved One’s Debt
In married couples, the debt is often a shared affair. This means that if one party passes, the other must continue to pay off the debt. However, in all other relationships, you are not responsible for another’s debt. In fact, saying that you are on the hook for a deceased loved one’s debt is a very popular scam.
Consider the event of your mother passing. Your father passed before her and you are left as the only living child. The creditors exhausted the amount they could get from her estate, but there is still an outstanding debt. Often what these creditors will do is a Hail Mary in which they call you and suggest you are responsible for paying that debt.
In truth, these creditors have no legal standing to make you pay. They can’t sue you or put a judgment on your property, or put negative marks on your credit reports. What they can do is guilt you into paying in ways such as suggesting it would ruin your mother’s memory by leaving debts unpaid. As many are unaware that debt cannot be inherited, they may end up paying the creditors without ever setting foot in a courtroom. Never fall for it.
Do You Have Debt and Need Help?
Overall, the fact that debt cannot be inherited to your children is good news. However, passing away with substantial debt is never ideal. It diminishes or can completely exhaust an estate, which leaves your loved ones with very little. After a lifetime of hard work, knowing that you left something for your family is comforting and you shouldn’t let the heavy burden of debt prevent that. If you have considerable debt, it is never too late to seek help in order to rectify that.
Contact us today to see how the Walker & Walker Law Offices can help you manage your debt.