Does a person's debt go away when they die? | Consumer Financial Protection Bureau (2024)

FAQs

Does a person's debt go away when they die? | Consumer Financial Protection Bureau? ›

When a person dies with debt, their estate becomes responsible for paying it back. However, if there isn't enough money in the estate, then generally no one else is obligated to pay.

If there's no money in their estate, the debts will usually go unpaid. For survivors of deceased loved ones, including spouses, you're not responsible for their debts unless you shared legal responsibility for repaying as a co-signer, a joint account holder, or if you fall within another exception.

When someone dies, their debts become a liability on their estate. The executor of the estate, or the administrator if no will has been left, is responsible for paying any outstanding debts from the estate.

Your personal representative must notify your creditors about your death. Creditors then have 30 or 90 days, depending on the method of notification, to file a claim. Generally, failing to file extinguishes the debt forever. However, a creditor who did not receive notice can file until the estate closes.

If you are the executor or administrator of the deceased person's estate, debt collectors can contact you to discuss the deceased person's debts. Debt collectors are not allowed to say or hint that you are responsible for paying the debts with your own money.

Most debt isn't inherited by someone else — instead, it passes to the estate. During probate, the executor of the estate typically pays off debts using the estate's assets first, and then they distribute leftover funds according to the deceased's will. However, some states may require that survivors be paid first.

You are generally not responsible for someone else's debt. When someone dies with an unpaid debt, if the debt needs to be paid, it should be paid from any money or property they left behind according to state law. This is called their estate.

Medical debt and hospital bills don't simply go away after death. In most states, they take priority in the probate process, meaning they usually are paid first, by selling off assets if need be.

It's possible to negotiate the credit card debt of a deceased person if you're legally responsible for paying the debt. That means you must be the executor or the administrator of the estate, a cosigner or joint account holder on the credit card, or a surviving spouse in a community property state.

When a person dies, creditors can hold their estate and/or trust responsible for paying their outstanding debts. Similarly, creditors may be able to collect payment for the outstanding debts of beneficiaries from the distributions they receive from the trustee or executor/administrator.

Am I obligated to pay my deceased parent's debt? ›

You are not responsible for your parents' debt. This is true regardless of whether you inherit assets under their estate. However, a parent's estate must settle any debts before you can inherit. And children often share financial responsibilities with aging parents, often medical and housing costs.

Credit reporting companies regularly receive notifications from the Social Security Administration about individuals who have passed away, but it's better to also notify them on your own to ensure no one applies for credit in the deceased's name in the meantime.

The named beneficiary on an account with a TOD or POD designation will likely need to present a certified death certificate, valid identification, and a completed claim form. Some banks may also require additional documentation to establish the beneficiary's claim on the account.

A creditor can only get a limited part of the inheritance while it is in your trust. What is needed for your son's support is protected. Over and above that, creditors may be able to get up to 25% of any payment made to your son. The same holds true if you believe your son is in a marriage that could end in divorce.

If you have a deceased indicator on your credit report you won't get approved for a mortgage, loans, or any major financial purchases. Creditors will believe that you are trying to use a dead person's information to obtain credit.

Most debts will be paid by your estate, out of your assets, before the remainder is distributed to your heirs. If the estate's assets do not cover all the debt, much of it will be forgiven.

Bottom Line. You are not responsible for your parent's debt. Any debt that they held is managed through the estate, and then disposed of.