Who manages your debts when you die?
When a person is dead, there is usually an executor, an adult child or a trusted friend or a lawyer, who is in charge of managing their assets. This person will be appointed by the prior to death, either deceased or their will, or if no executor was chosen before death, one will be appointed following a list of state priorities or a probate court, if necessary. Not all assets are distributed by the will of a person, even if there is not a will, a large number of goods of a dead person can be sorted by looking at the documentation they signed that designates beneficiaries.
One of the duties of an executor is handling the payment of the deceased's debts. It is important for the executor and / or family members to ensure that creditors are informed of the death if the accounts do not continue to accumulate charge or charges, whether a phone bill or credit card. It is a good idea to obtain additional copies of the death certificate, in case you are asked to provide evidence. Once the debts are paid, the remainder of the estate will be distributed.
what happens to specific types of debt?
Like every debt reports to your credit reports differently, the type of debt also affects what happens to him after the account holder dies. It should be noted that although the rules that we detail below are applicable to most situations, if you live in one of nine states properties of the community - Arizona, California, Idaho, Louisiana, Nevada, New -Mexico, Texas, Washington and Wisconsin - you may have to comply with other rules and even end up on the hook for the debt of a spouse after death, even if you are not a co-signer.
debtCredit card
If the credit card is owned by a single person, then their inheritance will be responsible for any balance remaining after death. However, if it is a joint account to credit card with a cosigner, such as a spouse or a child, that person will be held liable. Someone else in the life of the deceased, including authorized users on credit card account or the spouse of the person, can not be held responsible by the credit card companies. It is important that all authorized users or partners not to use the card after the death of the account holder to avoid accumulating additional charges.
To try to prevent things from getting too messy, some laws were enacted, including Credit Card Act of 2009, which requires credit card companies to notify quick succession any remaining balance on an account. This law also prohibits credit card company to tack on additional fees or penalties while the estate is settled. If there are not enough assets to pay the remaining credit card balance (s), the credit card company might try to contact family members to settle the debt. However, unless the account is in the name of family member, no one can be held responsible and the credit card company may wind up taking a loss.
The debt loan
student loan debt depends entirely on your loan source - private or public. Fully supported by federal loans (and federal PLUS loans for parents) will be completely discharged in case of death. Private loans, however, depend entirely on your lender. Some lenders do offer death and disability forgiveness, but most do not. If a person with a loan outstanding private student dies, the lender will first try to recover the balance of their estate. If there is not an area (or rather in the estate to cover the total), then it is towards the loan co-signer (if any) or the spouse of the person. It is important to note that joint legacy of student loan debt depends on the laws of the State, so that you and your spouse might want to check those out in the Financial Review, as some states offer exemptions for educational spouses who have not co-signed the loan.
Other types of loans will be treated similarly to private student loans. Again, the general rule is that any loan with a cosigner will become the responsibility of what cosigner should the sector of the primary signatory. If you are considering co-signing a loan with someone, certainly bear this in mind before going to the end.
mortgage loans and auto loans
As these two loans are secured with property that they exist to pay for, in case of death of the borrower, the lender either require that the loan either paid in full or take back and sell the property to satisfy the debt. However, if there is a co-owner or someone has inherited the property of their deceased loved, that person can handle the mortgage payments. If possible, the succession could repay the remaining loan as well, thus making the one who takes over the property does not have to take over the payments or refinance the loan. This is absolutely a case where it is important for the executor to be in communication with creditors and any person involved to prevent the loss of property in foreclosure or reclamation.
The medical debt
As for credit card debt, unless someone has signed all the documents that take responsibility for the medical bills of the deceased and unpaid debts will processed by the executor. If there is not enough money in the estate to pay off debt, it will not be inherited by someone else. As always, some exclusions to this rule may apply, so check with your local laws and always make sure to read all documents carefully before you sign if you are dealing with a loved one in the hospital or to an elderly parent in a nursing home.
What should I do if I am asked to pay a debt?
Sometimes, creditors may try to pressure the parents of a deceased person to pay outstanding debts. However, unless you owned a spouse or co-signed account, they probably have no place to stand. The laws vary from state to state, but in most cases, if you are contacted about a debt owed by a deceased loved one, it is best not to cooperate with the debt collector and instead of Contact the executor of the estate. The FTC describes some rules about what creditors can and can not do when trying to collect a debt owed by a person who has passed.
Beware of identity theft
Unfortunately, identity thieves are unscrupulous and not over looked at obituaries to find recently deceased to try to steal an identity from. That is why it is absolutely vital that someone contact the three credit bureaus as soon as possible regarding the death of a loved one. Although the offices will eventually update this information themselves, it might take some time, and meanwhile the identity of your beloved could be exploited by a criminal. You can find contact information for the three credit bureaus on the website of the FTC. Similar, the Identity Theft Resource Center has a long list of things you can do to reduce the risk of identity theft when a loved one dies, and you can learn more about identity theft by following our blog identity Protection against theft.
The good news is, your debt can follow you beyond the grave - but it can haunt your friends and family members. A little planning before now regarding how your finances will be processed after spending may help relieve some of the strain of your family on the road. To learn more about personal finance, visit our blog.