What Happens To Debt After A Death?
According to NerdWallet, Americans owe trillions of dollars in debt, including credit cards, mortgages, auto loans, and student loans. The average household has $15,983 in credit card debt and $47,047 in student loan debt as of December 2017.
The company surmises a factor in the continued growth of American debt is that spending is outpacing increases in income in some major categories, including healthcare, housing, and food.
Sadly, many Americans will die owing thousands of dollars of debt. Which leads us to ask, what happens to debt when you die? Can you inherit debt or is debt transferable after death? Does debt die with you and what happens to debts after death with no estate to handle the debts?
Unfortunately, many families may find themselves in a financial crisis when they lose a loved one because of the debt left behind. Our Texas bankruptcy lawyers can answer some of the most frequent questions about what happens to debt when you die.
We encourage you to contact our office to speak with a bankruptcy lawyer if you have questions about debt relief, co-signed debts, joint accounts, or unpaid medical expenses for a loved one. But before getting into your specific case, let’s take an overview of what generally happens to debt after death.
What Happens to Credit Card Debt When You Die?
Credit card debt after death remains an unsecured debt, meaning the credit card company does not hold a lien on any collateral. What happens to your credit card debt when you die depends on several factors.
If you did not own real estate or substantial assets to file a probate estate, the company could close the account and notate it as “credit card debt forgiveness death” upon a request from your heirs and proof that you did not own any assets at the time of your death. However, if the credit card account was a joint account with a co-signer, what happens to credit card debt if you die is much different.
The co-signer becomes responsible for the full amount of the credit card debt when you die. The company may file a claim against your probate estate if an estate is opened, but it will look to the co-signer for payment of any balance owed after the estate is closed. The company may file a lawsuit to collect the debt.
In addition, because Texas is a community property state, there are some instances where a spouse may be held liable for the other spouse’s credit card debt. This is not true in all cases, and a spouse should consult an attorney before paying off the credit card debt of a deceased spouse.
What Happens to Medical Debt After Death?
What happens if you die with debt related to medical care could be tricky depending on the provider of the care and the type of assets you own when you die. In most cases, medical providers file claims against your probate estate to receive payment from the estate. However, what happens to debt after death for medical bills when there is no estate?
In most cases, the creditors have no recourse against relatives if the estate does not have sufficient assets to repay unsecured debts, including medical bills. However, there could be some cases in which a relative may be responsible for the medical debts of a loved one.
For example, if the decedent was a minor, parents are usually responsible for the payment of medical expenses incurred by the minor. In addition, if a relative or other person signed documents for the healthcare provider making that person liable for any and all services, that person could be held liable for the medical debt.
When Someone Dies What Happens to Their Debts for a House or Car?
You may be very concerned about what happens to debt after you die when the loan is secured by collateral. Let’s look at the answer to these questions separately.
What happens to my debt when I die owing a mortgage on my home?
Several scenarios could play out depending on the facts. If there are sufficient funds in your estate, your administrator could pay the mortgage in full. On the other hand, if the home is jointly owned, the co-owner becomes responsible for maintaining the payments on the mortgage. If there is no co-owner and the estate does not have sufficient funds to pay the mortgage, the person who inherits the property becomes responsible for the debt if he or she wants to keep the property.
What happens to my debt if I die owing a car loan?
The same scenarios impact what happens to a car loan after death. The estate, a co-signer, or the person who inherits the vehicle can pay the loan. If the loan payments are not paid, the lender can repossess the vehicle just like a mortgage company can foreclose a home if the mortgage payments are not paid.
Contact a Texas Bankruptcy Lawyer if You Are Struggling with Debts You Cannot Pay
While you cannot inherit debt from another person, you could be liable for the debts of another person in some circumstances. Our Dallas and Fort Worth bankruptcy law firm represents clients who have found themselves in financial trouble for a variety of reasons.
We encourage you to take advantage of a free consultation to get answers to your questions before you take any steps. You may have several options available that could greatly reduce the amount of debt you owe.
Contact one of the experienced DFW bankruptcy attorneys of Leinart Law Firm by calling (469) 232-3328 or (817) 426-3328 to request a free bankruptcy consultation.