What Happens to Your Debt When You Die?
Right about now you may be wondering how it is fair that your surviving family must pay off your debt. The truth is that in most cases they are not actually handing over their hard earned money to pay your remaining debt. The way that most creditors obtain money that is legally owed to them is by going after any estate money or property. This will not directly take money from your family; however, it may prevent them from obtaining their full inheritance.
A number of states have begun placing limitations on the amount of estate money or property a creditor can claim; however, even with limitations in place most creditors will still try get what is owed to them. The only way that debt can be forgotten after death is if there is no money, property, or other assets left behind. If money cannot be collected from an estate then creditors will likely not go after surviving family members except for in rare cases.
One of the above mentioned rare cases includes joint property or joint debt. Many married couples have joint bank accounts and joint debt. This makes it possible for a surviving spouse to be held legally responsible for the occurred debt of their loved one even if they may not have generated the debt themselves. Depending on the amount of debt, this is something that could cause problems for surviving spouses who are financially unable to afford everyday necessities and pay off old debt.
Although it is impossible to prepare for an unexpected death there are a number of things that you can do to financially prepare for it. If you are indebt, regardless of the amount, you are urged to speak with your family members about that debt. They need to be aware how much debt you owe and to who. This will not only make them feel involved in your financial planning, but it will also allow them to prepare for their own future.
If you become sick or are expected to pass away in the coming years try and work to pay off any debt that is owed. You may prefer to leave your assets to your children or other family members in an inheritance, but it is also important to remember that many creditors will get their money one way or another. Using your savings or property to pay off debt will prevent your family from having to go through difficult meetings with lawyers and creditors.
Understanding what happens to your debt after you pass away can be pretty confusing; however, that should not stop you from learning the facts. The best way to protect your family is by knowing how debt works before and after death.