Debt Consolidation Loans

Can You Inherit Debt

Debt is often a very stressful thing for people to have and it can follow them throughout their lives. In fact, it often still remains after the person is deceased. Loved ones have enough difficulty dealing with the loss. Determining how to handle this outstanding debt is the furthest thing from their minds. The answer to whether a person can inherit debt depends on the individual’s relationship to the debtor.

A person cannot inherit a debt unless he or she was a party to it before the debtor died. The estate closes out the financial transactions of the deceased by paying all final bills. If debts are greater than assets held, the assets are sold off to pay as much of the debt as possible. Secured debts, such as a car payment or mortgage, are paid first and the remaining money is used to pay unsecured debts like credit card balances. Any debt that remains after all of the money is spent is simply not repaid and the creditor must write off the loss.

Some people try to work around this post-death asset sell off and give away their assets before they die. A creditor can actually reverse these gifted transactions in order to collect money it is owed. This reversal can occur even after the individual dies.

There are several ways individuals can put themselves in a situation to accept responsibility for the debts of the deceased. If survivors have a joint checking account with the deceased, even their own deposits can be used to pay the bills. Having a joint credit card can put the survivor at risk because the credit card company will attempt to collect the money from either person listed on the account.

A person should not write a check from his or her own account to pay bills for another who is terminally ill. Though it is unlikely to result in a creditor assuming that the check writer accepts responsibility for the debts if the ill person should die, it could happen. An individual can get check writing authorization with a signed request from the person on whose behalf he or she is acting.

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