What Happens to Debt When a Person Dies?
Are you scared of the outstanding debts of your deceased parents? Are you scared as you are thinking that the creditors would now chase you to collect those debts? Know what to do and what not in case a person dies leaving huge outstanding debts.
If There Are No Assets
If a person dies and leaves no money or assets, then his debts are canceled. His family never inherits the debt. The deceased person must not have any money in a bank account, bonds, stocks, or CDs. He further must not own any car, which the creditor can sell to recover the money.
Community Property States
In a few cases, a husband or wife may have to bear the debt of his/ her deceased spouse. This basically occurs in community property states. However, the spouse can be held responsible for only those debts that have been incurred during the marriage. The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.
Joint Accounts
If the deceased person had any joint account with another member of the family, then that particular family member is responsible for paying off the whole debt. This happens when a parent or a grandparent co-signs for a car or student loan. If a college student passes out suddenly, the parent who co-signed the loan have to pay the entire debt.
Leaving Property
If a car or house is given to a family member, then the family member has two options. He may either sell the car or house and pay off the loans, or he can grab the house and continue to make the monthly payments. This is only if all debts are paid, or if there are not any other debts.
Discussion
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