Many people have debt as adults. This can come from a variety of reasons, such as medical care, major purchases and credit cards. One question that often arises after the person passes away is who is responsible for those debts, because the debts don’t die along with an individual.
When a person passes away, their estate administrator must take steps to alert creditors of the death. Those creditors have the opportunity to file a claim against the estate. Administrators must handle debts in accordance with the applicable laws, which set a specific priority list for all debts.
What happens if the estate can’t pay the debts?
If an estate is insolvent, which means that there’s nothing available to pay debts, those debts will go unpaid. The creditors should write off the debts unless there is someone else legally liable for the debts.
People who may be responsible for the debts include those who are named as joint account holders or co-signers. If those are listed on the account, those individuals can be held accountable for those balances due.
Can creditors collect from anyone else?
Creditors shouldn’t ever try to collect the debt from loved ones of the decedent who aren’t liable for the balances due. Unfortunately, some may do this anyway. Individuals who are contacted for their deceased loved one’s debts should direct the collector to the estate administrator. They shouldn’t ever give their own personal or financial information.
The person who’s handling the estate administration should ensure they understand how to handle every aspect of the estate. This includes paying debts in order and before the distribution of the assets to the heirs and beneficiaries. Working with someone who’s familiar with these matters may be beneficial for individuals who take on these duties.