Helping you Manage the Financial Details of Your Life



What Happens to Debt When Your Loved One Dies?

What happens to a deceased person’s debt after he dies? His heirs may wonder whether they are responsible for the debt their loved one left behind.

When a person passes away, she leaves an estate which is comprised of money in bank and investment accounts, cash, real estate, vehicles, household furnishings, and other financial or tangible assets. The estate, managed by the executor named in the person’s will, pays the debts. Anything left over is passed to heirs as dictated by the will. If the loved one didn’t have a will, state law governs how any remaining funds are distributed.

If the deceased does not have any assets or there is not sufficient money in the estate to pay debts, the estate is declared insolvent and the creditors don’t get paid.

There is some exception to this, including:

  • Loans with co-signers. These payments now become the responsibility of the co-signers.
  • Credit cards with joint owners. The surviving joint owners need to pay these bills.
  • Secured debts. Secured debts have an asset attached to it such as an automobile or a house. These loan or mortgage payments still need to be paid. If the estate is insolvent, an heir may need to make these payments until the loan is paid off, the property is sold, or it is returned to the lender.
  • Debt in community property states incurred by a deceased spouse.  According to, “in the handful of states with “community property” rules, most debts incurred by one spouse during the marriage are owed by both spouses.” (Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.)

Family members and other heirs may be contacted by debt collectors when those members become responsible for a loved one’s debt. They are protected by the Fair Debt Collection Practices Act which, according to the Federal Trade Commission (, “prohibits debt collectors from using abusive, unfair, or deceptive practices to collect from you.”

State laws determine the order in which bills and debts get paid. Generally, estate administration fees, funeral expenses, medical bills, and taxes get paid first. These are followed by secured debts. Credit card debt is usually paid last.

There are some monies creditors cannot tap to have their bills paid. These are assets that have named beneficiaries and include retirement accounts and life insurance policies.

If you have questions regarding a loved one’s debt or estate, I recommend you contact an estate planning attorney. He or she will know the state laws and be able to advise you. You can look for an attorney at


This blog is published to provide you with general information only, and is not intended to provide specific or comprehensive advice.  Money Care, LLC encourages individuals to seek advice from competent professionals when appropriate.