Debtdoesnt typically die when we do.
So, what happens to your debt when you die?
The laws also vary from state to state.
Generally speaking, debts must be paid off by your estate when you die if you have any assets.
(Well get into co-signers, spouses and joint accounts a little later.)
Assets could include the persons home, cars or other valuable items.
Creditors want and expect to be paid by your estate.
They may make a legal claim in probate court.
That is the legal process that oversees the handling of your estate.
It can take a while for your financial affairs to get sorted out.
So creditors may agree to a settlement with your estate for less than the total amount of debt.
Creditors all want cash, and they prefer immediate cash.
If your assets dont cover your debts, they typically go unpaid,according to the Federal Trade Commission.
Heres what happens to different types of debt when you die.
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The same is true for a joint credit card.
If one spouse dies, the other is responsible for paying off any debts that remain.
Alaska, South Dakota, and Tennessee give parties the option to make their assets community property.
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However, private student loans arent canceled upon death.
The lender will attempt to collect compensation from your estate.
Mortgage
When you die and have a mortgage, it doesnt go away.
What if You Have No Assets?
The best planning is to die with no assets, OGrady said.
They can call other relatives, but only to help locate a spouse or the estate executor.
Sarah Kuta is a contributor to The Penny Hoarder.
