Losing a Family Member - Do You Inherit Their Debt?

There are many horror stories both on and offline of families that are in turmoil over the death of a loved one, only to be forced homeless due to mounted debts incurred during that individual's life. When you lose a family member, you may wonder if you have to pay back that debt yourself.

There are only a few instances in which case you inherent that person's debt. First, if you are a spouse and cosigned or received joint loans and mortgages, then yes, you are responsible for their debt. However, be advised that you are not responsible for any debt that did not have your name associated with it, even if your partner did get the debt while you were together.

 
If That Is The Case, Then Why Does The Debt of a Spouse Affect So Many Widowed Spouses?

You may still have heard stories of how debt affects the partner of a spouse. But in a way, these are misleading. When a partner dies, the widow or widower is not receiving that individual's debt, but the lending institution does have a right to collect their dues.

These lending institutions can take their owed money out of the deceased bank accounts. This is where the problem arises - many couples have joint accounts, meaning that they share finances. A joint account is still an account in the deceased's name, which means that lending institutions are allowed to take money from the account and it is possible to leave the deceased's family with next to nothing.
Similarly, anything the individual owns is at risk for repossession as well. The house, the car, and anything else that can be taken in order to pay back the debt is legal if it is in the name of the deceased.

Can the Lenders Ask the Family For Money if the Assets Are Not Enough?

Many lenders, when the estate is not enough to cover the debts, tell the family they are required to pay back the debts in their place. But no matter what they tell you, be advised that you are not required to pay back any of the debts of the deceased at any moment. Debt management companies can advise you further on any concerns you might have regarding this issue. There is no legal obligation to pay back the debts of someone that has passed if your name is not on the loan .

 

 So if you get asked to pay it back, or even told that you have to pay it back according to the law by a lender, you are not obligated to pay back the loans. When an individual dies, the debts of the individual die with them with the exclusion of anything that can be used to pay back the loan that is also in the individual's name.





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