Where Do Debts Go When We Die?

In life, nothing is certain except death and taxes. But what happens to the money you owe once you've passed on? Let's find out and prepare accordingly!

Loans, credit cards, and mortgages all work on the assumption that we can pay back what we borrow from the bank in the future when we have the funds. But suppose the future doesn't come for us? What then? While death may not be the sexiest subject to talk about, it's still a highly important one to prepare for. With that, let's answer the question: What happens to our debts when we die?

When you're still alive, your property (which includes assets and liabilities) are just called 'your property'. You own them, and are responsible for them. Simple. However, upon your death, your property will be called your 'estate'. It doesn't matter if you never owned any land, that's just what everybody calls it.

Upon your death, an administrator (or several) will be appointed to manage your estate (either by yourself through your will or by the government if you never got around to writing one). Your creditors will then have the legal right to retrive the amount you still owe from your estate. This includes taking ownership of your house for auction, repossessing your vehicle, or other methods to get their cash back. In fact, until all your debts are repaid, the distribution of your estate to your kin as per your will won't take effect.

Will They Go After My Family?

Often, the administrators to your estate will be your next of kin (even the government appointed ones) and yes, they'll be responsible in managing your estate should your creditors come for their cash.

However, they do not have the right to go after the administrators themselves and insist that they pay out of their own capabilities. Remember: your creditors are only entitled to your estate, not the administrators.

There is an exception to this rule, though. If someone else was jointly liable on the debt together with the deceased. In this case, the surviving co-signee will have to repay the rest of the debt on their own, and the bank won't be wrong to chase after them.

What if My Estate is Not Enough to Pay Off My Debts?

In this situation, banks may be willing to write off any unpaid amounts as losses and move on. But, there have been cases where creditors insist on getting their payment from family members and even threaten to sue. Should this happen, we suggest contacting an attorney to figure out your next move. Things can get complicated should the banks decide to move things this way and it's best to get legal counsel.

In order to truly protect your loved ones from bearing the brunt of your financial dealings, be sure to get your loans, credit cards, and other debt insured whenever possible. They may be a little pricey now, but there's no price too expensive for peace of mind. Speaking of getting insured, check out our insurance comparison tool to find the best way to protect you and your loved ones from the unexpected. Do you have anything to contribute to this article? Share your thoughts with us in the comments section below!

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