When you pass away with debt, what happens to it? That can depend on the type of debt and the creditor you’re dealing with, but one thing is clear. If you want to make sure that it’s easy for your family to handle the requests of creditors, you should set up an estate plan and write a will. A Bergen County estate planning lawyer can help you with that.
Will My Debt Be Forgiven When I Die?
Not necessarily. There are many different types of debt and many different types of creditors out there. Not all of them follow the exact same rules, and some of them may have their own policies about pursuing debt after someone has passed away.
There are a few types of liabilities that are unlikely to be forgiven. When your estate goes into probate, creditors are likely to come calling and will want to collect on the following:
- Private student loans
- Credit card balances
- Medical debt
- Any kind of secured debt
Federal student loans are often forgiven, but if your estate has assets most other debts will need to be paid.
What Happens to Secured Debt?
We also should mention secured debt. This is essentially a loan that is guaranteed by collateral, a specific property. A car loan is a great example. Don’t make your loan payments and your car gets repossessed.
Unfortunately, these rules still tend to apply once you have passed away. If you do not have your car or home paid off, it could be sold off if the remaining debt is not addressed.
Who Pays My Creditors When I Pass Away?
It’s obviously going to be difficult for you to pay your creditors once you have passed away. This is why it’s important to have a will in place and an executor chosen. The executor is in charge of handling your estate after you pass. This means that they make sure that your wishes are honored and that assets pass on to the right people, but that’s not all.
An executor also takes care of your finances and any remaining liabilities. They will file taxes and pay whatever is owed to the state and federal governments, and then they can address the requests of different creditors.
In some cases, a creditor won’t bother going after your estate if the assets just aren’t there. They can go after someone else who is associated with the debt in that case. A good example of this would be a joint credit card with your spouse. Even if your estate didn’t have significant assets, a credit card company is unlikely to forgive your balance if they can just get it from your spouse. The main takeaway from this should be that most creditors are going to do everything that they can to get paid after you pass away.
Make Your Estate Plan Today
So if you need help making an estate plan of your own, contact the Law Offices of Colin M. Quinn. We can schedule a consultation and tell you more about your options and what our attorneys can do to be of assistance.
