Losing a loved one — a parent, spouse, or sibling — is difficult enough. But what if your loved one left mortgage, auto loan, or credit card debt behind? Will you now be responsible for paying those bills?
In most cases, no. Creditors can’t force you to cover the unpaid debts of loved ones who have died. But the money that your loved ones owed might cut into or even eliminate any inheritance that was meant for you or other survivors.
What usually happens
When people die, the money they owe creditors — everyone from their mortgage lender, to their auto loan providers, to their credit card companies — is collected from their estate. The estate in this case is defined as the money and assets owned solely by the deceased.
This might mean that the house your parents owned has to be sold to pay off any mortgage debt they owed. Their car might have to be sold to pay off credit card or other debts.
Whatever is left after these debts are paid off remains in the estate of the deceased. If your parents wanted to leave money behind for their children and grandchildren, the amount they wanted to bestow will be reduced by however much they owed creditors at the time of their death.
It can get more complicated
Of course, that’s the most basic course of action. In reality, money matters can get more complicated after the death of a loved one.
This is especially true when you lose a spouse. In most states, you won’t be responsible for any debt that your spouse left behind when he or she died, as long as the debt was accrued in your spouse’s name alone. If both you and your spouse share a credit card or a mortgage, then you will be responsible for making payments on that debt after your spouse dies.
If you live in what is known…