HomeAnswersWhat happens to debt when you die?
What happens to debt when you die?
When someone dies, their debts are generally paid from their estate, meaning the money and property they leave behind, and family members usually do not have to pay those debts from their own money. The FTC says that if there is not enough in the estate to cover a debt, it usually goes unpaid.
There are exceptions. The CFPB says survivors can be responsible when they shared legal responsibility for the debt, such as a co-signer or a joint account holder, or when another exception applies. One exception involves community property states, which the CFPB lists as Alaska (if a special agreement is signed), Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, where state law can require a surviving spouse to use jointly held property to pay a deceased spouse's debts.
Debt collectors may contact a surviving spouse or the person handling the estate, but the CFPB says it is illegal for them to suggest you must pay from your own money when you are not responsible, and you can tell a collector to stop contacting you. The FTC says collectors can reach other relatives, usually only once, to get contact details for the estate's representative, and cannot discuss the debt with them. Life insurance follows its own path. The Florida Bar notes that a policy payable to the estate is a probate asset while a policy payable to a beneficiary may not be, and the Texas Department of Insurance says the insurer pays the estate if no beneficiary is named or the beneficiary has died. Rules vary by state, so a lawyer can confirm how they apply to a specific estate.
The sources behind this answer
- The FTC says a person's debts do not go away when they die, are owed by and paid from the estate, and family members usually do not have to pay them from their own money. FTC
- The FTC says that if there is not enough money in the estate to cover a debt, it usually goes unpaid. FTC
- The CFPB says survivors, including spouses, are not responsible for a deceased person's debts unless they shared legal responsibility as a co-signer or joint account holder, or fall within another exception. CFPB
- The CFPB lists community property states that require surviving spouses to use jointly held property to pay a deceased spouse's debts as Alaska (if a special agreement is signed), Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. CFPB
- The CFPB says debt collectors may contact a surviving spouse or the person overseeing the estate, but it is illegal for them to suggest a person who is not responsible must pay from their own money, and always illegal to harass. CFPB
- The CFPB says that under the Fair Debt Collection Practices Act, collectors may not harass, oppress, or abuse, and a person has the right to tell a debt collector to stop contacting them even if legally responsible for the debt. CFPB
- The FTC says collectors can contact relatives who lack power to pay from the estate only to get contact information for the estate's representatives, usually only one time, and cannot discuss the details of the debt with them. FTC
- The Florida Bar says a life insurance policy payable to the decedent's estate is a probate asset, while a policy payable to a beneficiary may not be a probate asset. The Florida Bar
- The Texas Department of Insurance says that if no beneficiary is named, or the beneficiary has died, the insurer pays the death benefit to the estate. Texas Department of Insurance
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