Many people have debts throughout adulthood. These can include things like bills for medical care, credit cards, car notes and mortgages. Some people don’t think about what happens to those when the account holder dies, but it’s important to understand what’s likely to happen.
There are a few factors that play a role in exactly what happens with these debts if the person dies. Typically, secured debts can be returned to the creditor, but there may be an option to pay them off. Unsecured debts will likely have to be handled in another manner.
What determines how these debts are handled?
If the person who died was the sole account holder, the account will be handled through the probate process. The creditors can file a claim with the estate, and that will be handled in accordance with applicable laws as long as there are funds or assets to liquidate. If there isn’t anything left in the estate, it’s insolvent, and the accounts won’t be paid.
If an account has a co-signer or a joint account holder, that individual will be responsible for the debt. If there’s no co-signer or joint account holder, the loved ones aren’t responsible for the debt. Any loved one who’s contacted by a creditor should point them toward the estate administrator. They shouldn’t ever give out their own financial information.
The estate administration process can be complex, so it’s critical that the person handling it fully understands what they should do. Ensuring the debts are paid based on estate administration laws can ensure the probate process won’t be unnecessarily delayed. Working with someone who can assist with this process is beneficial for anyone who’s handling the probate process.