If your parents or spouse has recently passed away, you may stand to inherit some things from them. However, one thing that you do not want to inherit is their debt. With that in mind, we have decided to answer the question, “Can you inherit debt?” such as credit card debt, mortgage debt, and other types of debt. Keep reading to learn when you might be on the hook for any unpaid balances and what you can do about it.
Does a spouse inherit debt?
Typically, family members don’t inherit the debt of a loved one who dies. While the deceased person’s estate may owe debt, this typically will not transfer to a loved one. If the deceased person went through an estate planning process, they hopefully have life insurance or enough money and assets to cover the estate’s debts. If aren’t enough assets, the estate may be declared insolvent, and the unpaid debt resolved.
However, when a spouse is involved, the situation becomes more complicated. In this case, your level of responsibility will depend on where you live and how you applied for the accounts in the first place.
If you’ve applied for a joint account or as co-borrowers, you will still be responsible for the debt. In some instances, even if you are simply an authorized user on your loved one’s account, you can still be on the hook for paying off any remaining balances. This applies if you continue to add to the card’s balance after your loved one’s death.
In addition, if you live in a community property state, there’s a good chance that your debts will be considered jointly held, even if you didn’t apply as co-borrowers. State laws mean Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin are community property states. Meanwhile, Alaska allows spouses to treat their assets as community property.
Can you inherit debt from your parents?
Similarly, many families often ask, “Are children responsible for parents’ debt?” Fortunately, it’s a bit less common to inherit a person’s debt in this situation. You may find yourself responsible for paying off your deceased parents’ debt if you are listed on the account as a co-borrower or co-signer.
A co-signer is often used in situations where the person who is applying for financing has poor credit. In this case, the co-signer is typically added to the loan to help the primary borrower receive a better interest rate. However, they accept responsibility for the outstanding debt if the primary borrower defaults on the loan in exchange.
If you have signed an agreement like that for your parents, there’s a good chance that you will be liable for any remaining debts. However, if not, you likely will not be able to be held responsible.
What to do if creditors come calling
Now that you have a better idea of when it is possible to inherit debt, the next step is to learn what to do if creditors come calling. While every situation with a lender will be different, we’ve listed some general guidelines for you to follow below. Read them over so that you’re better prepared if this situation does occur.
Update the credit bureaus
When a loved one passes away, you will likely have many tasks to take care of at the time. Depending on their relationship with debt, you may want to update the credit bureaus of their passing.
Typically, funeral directors will update the Social Security Administration of a death. However, this process can take a couple of weeks to complete. If you need to make sure it happens sooner, you may want to take on this task yourself.
If you decide to go this route, you will need your loved one’s full legal name, social security number, birth date, and date of death. You will also likely need to provide identifying information for yourself and your relationship to the deceased to the credit bureaus like Experian, TransUnion, and Equifax.
Know your rights
Remember that while debt collectors are allowed to contact you to see who is the executor of the estate’s assets, they are not allowed to pressure you to make payments on debts that are not your responsibility. They must also follow federal laws regarding debt collection and state or local stipulations.
If you have to fend off your loved ones’ creditors, do yourself a favor and familiarize yourself with the Fair Debt Collections Practices Act. The Act outlines how creditors are and are not allowed to behave. If a creditor is stepping over the line, consider filing a complaint with the Consumer Finance Protection Bureau (CFPB).
Consider hiring a lawyer
On the other hand, if debt collectors insist that you are responsible for debts you do not believe you owe, it may be time to consider getting a lawyer. In particular, you will want to hire a lawyer specializing in debt collection defense.
If you’re ready to tackle debt head-on, contact Tayne Law Group today for a free consultation. We can help you gain clarity around your loved one’s debts and help you get out from under them once and for all.
The bottom line on inheriting debt
By and large, if you do not agree to accept responsibility for your loved one’s or spouse’s debts, creditors will not be able to come after you for repayment. That said, there are a few situations where you may be held responsible. Use this post as a guide to help you figure out whether or not any existing debts from your loved one will become your responsibility and, if so, what you should do next.
If you are ready to talk to someone about your debt settlement options, get in touch with Tayne Law Group today, which has been settling debts for over 20 years and have won many awards. Reach out at (866) 890-7337, or fill out our short contact form, and we’ll respond as soon as possible.
