Having debts is a normal part of life for many people, but this can sometimes lead to some challenges when the person passes away. Many individuals have questions about what happens to those debts when the person dies.
In almost all cases, the debts of the decedent are handled by the estate. The individual who’s acting as the personal representative over it has to alert creditors and then pay the debts in an order established by the law.
What happens if the estate can’t pay debts?
The estate may have to liquidate assets to pay off debts. If there aren’t assets to liquidate, the estate is insolvent. Once this happens, the estate can’t pay the debts. This means that some creditors won’t receive the money they were due prior to the decedent’s debts.
Are loved ones ever responsible for paying the debts?
Loved ones typically aren’t responsible for paying their loved one’s debts. The exceptions to this are if the loved one is the joint account holder or co-signer. People who fall into either of those categories will have to pay for the debt once the account holder passes away.
What should loved ones do if they’re contacted by a creditor?
Anyone who’s contacted by a creditor should only provide the contact information for the estate’s personal representative. They shouldn’t ever provide their personal or financial information.
Paying the estate’s debts is only one duty of the personal representative during the probate process. Working with someone familiar with these matters is important so the individual can ensure they’re acting in the best interests of the estate and remaining compliant with applicable laws.