If you owe someone a debt when you pass away, it’s unlikely to just disappear. Someone is going to have to address it. Our Washtenaw County asset preservation attorneys can help you make an estate plan that prepares someone to handle any remaining debt you have when you pass away.
Will My Debt Be Forgiven When I Die?
Not necessarily. Some debts, like federal student loans, may be forgiven. Depending on the value of your estate some other creditors and lenders may decide that pursuing the debt that you owe them just isn’t worthwhile. Credit card companies, for example, might not bother trying to get money from your estate if it lacks assets. They can just write it off.
However, keep in mind two things. One, many types of debt will not be forgiven. If you owe private student loans, they are unlikely to be forgiven once you pass away. Any medical bills are probably going to need to be paid out of the estate too.
The other thing to keep in mind is that if your estate lacks the assets, anyone else responsible for one of your debts can be pursued. If you had a joint credit card with your spouse, don’t expect the creditor to give up on collecting that money. Either your estate is going to pay it or your spouse will. The same goes for any loans that you had a co-signer for.
Who Ensures That My Creditors Get Paid?
So if you have debt that needs to be paid after you pass away, who handles that for you? This is exactly why it is so important to take the time to write a will and pick a responsible executor. This is someone who takes care of your affairs after you have passed away. That includes everything from paying debts and filing taxes to ensuring that your loved ones get the property that you have left behind for them.
When your estate goes into probate, creditors can notify your executor about any outstanding debt. If your estate has the money, your executor can pay off any liabilities. Then whatever assets are left over can be passed onto your heirs.
What If I Have a Secured Debt?
Another thing to be aware of is how secured debt works. A balance on a credit card is an unsecured debt. There’s nothing to back it up. A bank or credit union cannot come and just take the stuff you bought with it.
A secured debt is different. There is a specific piece of property that can be repossessed and sold by the lender. Great examples of this are a home with a mortgage and a car that has been financed with a loan. Creditors are unlikely to give up on pursuing what they are owed once you pass away and property could be sold off if your estate cannot pay your secured debts.
Talk to Our Estate Planning Lawyers
Preparing an estate plan can help your family deal with matters like this. So contact Collis, Griffor & Hendra to schedule a consultation and make things less stressful for your loved ones.
