[{"@context":"https:\/\/schema.org\/","@type":"BlogPosting","@id":"https:\/\/www.amorusolaw.com\/blog\/what-happens-to-debt-when-you-die-greenwich-ct-new-york-ny\/#BlogPosting","mainEntityOfPage":"https:\/\/www.amorusolaw.com\/blog\/what-happens-to-debt-when-you-die-greenwich-ct-new-york-ny\/","headline":"What Happens to Debt when You Die?","name":"What Happens to Debt when You Die?","description":"\u201cCreditors typically try to collect on unpaid debt, by going after the decedent\u2019s estate during a process called probate.\u201d When a person dies, it\u2019s not unusual for them to leave behind some unpaid debt. What happens to that debt depends upon how their estate was organized, says the article “This is how your unpaid debts […]","datePublished":"2020-09-01","dateModified":"2023-07-29","author":{"@type":"Person","@id":"https:\/\/www.amorusolaw.com\/blog\/author\/amorusolaw\/#Person","name":"Amoruso & Amoruso LLP","url":"https:\/\/www.amorusolaw.com\/blog\/author\/amorusolaw\/","identifier":5,"image":{"@type":"ImageObject","@id":"https:\/\/secure.gravatar.com\/avatar\/12de032c04195e9c39a06a6d6eea182f7b4fa655c20e245f8094a244b5cdd0cb?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/12de032c04195e9c39a06a6d6eea182f7b4fa655c20e245f8094a244b5cdd0cb?s=96&d=mm&r=g","height":96,"width":96}},"publisher":{"@type":"Organization","name":"Amoruso & Amoruso LLP","logo":{"@type":"ImageObject","@id":"https:\/\/www.amorusolaw.com\/wp-content\/uploads\/2023\/07\/amoruso-logo.svg","url":"https:\/\/www.amorusolaw.com\/wp-content\/uploads\/2023\/07\/amoruso-logo.svg","width":0,"height":0}},"image":{"@type":"ImageObject","@id":"https:\/\/www.amorusolaw.com\/wp-content\/uploads\/2023\/04\/6a01901dd0a082970b026bde8dc65e.jpg","url":"https:\/\/www.amorusolaw.com\/wp-content\/uploads\/2023\/04\/6a01901dd0a082970b026bde8dc65e.jpg","height":600,"width":900},"url":"https:\/\/www.amorusolaw.com\/blog\/what-happens-to-debt-when-you-die-greenwich-ct-new-york-ny\/","about":["Beneficiary","Debt","Estate Planning","Probate","Surviving Spouse"],"wordCount":526,"keywords":["Beneficiary","Debt","Estate Planning","Probate","Surviving Spouse"],"articleBody":"\u201cCreditors typically try to collect on unpaid debt, by going after the decedent\u2019s estate during a process called probate.\u201dWhen a person dies, it\u2019s not unusual for them to leave behind some unpaid debt. What happens to that debt depends upon how their estate was organized, says the article “This is how your unpaid debts are handled if you pass away” from CNBC.com. The estate consists of whatever is owned solely by the deceased person, whether the person was wealthy or not. It includes financial accounts, real estate and personal possessions.For surviving spouses, this can be worrisome. In most instances, they are not responsible for their spouse\u2019s debt, but there are some exceptions. Here\u2019s how it works.Paying off all debts and then distributing the remaining assets is part of the probate process. Every state has its own laws regarding how long creditors have to make a claim against the estate. In some states, it\u2019s a few months, in others it can last a few years. An estate planning attorney in your state will know how long the estate is vulnerable to creditors.In most states, funeral expenses take priority, then the cost of administering the estate, followed by taxes and hospital and medical bills. However, not all assets are necessarily part of the estate, and this is where estate planning is important.Life insurance policies, qualified retirement accounts and other assets with named beneficiaries go directly to the beneficiaries and do not pass through probate. The same goes for assets placed in trusts, and jointly owned property, as long as it has been properly titled.With the right planning, it is possible that an entire estate, including one that is insolvent, could be passed on to heirs outside of probate, leaving creditors high and dry. However, there are a handful of states that have \u201ccommunity property laws\u201d that make debt more complicated.The law in these states views both assets and certain debt accumulated during the marriage as being owned by both spouses, even if it is only in the decedent\u2019s name. That includes debt like medical expenses or a mortgage. However, that\u2019s not the final word. A well-structured letter with a copy of the death certificate can sometimes lead to the debt being discharged. During the probate process, the company holding the debt should be advised that the estate has little or no assets to cover the debt and ask that it be forgiven.This does not apply to co-signing on a loan. Although the request can be made, it is not likely to be honored. Federal student loans are forgiven if the student dies, which seems a matter of kindness. Parent PLUS loans, which are loans taken out by parents to help pay for education, are usually discharged, if the student or parent dies.Your estate planning attorney can help structure your estate to protect your surviving spouse and family members from creditors.Reference: CNBC.com (July 31, 2020) “This is how your unpaid debts are handled if you pass away”For more information on asset preservation and estate planning, please visit my estate planning website."},{"@context":"https:\/\/schema.org\/","@type":"BreadcrumbList","itemListElement":[{"@type":"ListItem","position":1,"name":"Blog","item":"https:\/\/www.amorusolaw.com\/blog\/#breadcrumbitem"},{"@type":"ListItem","position":2,"name":"What Happens to Debt when You Die?","item":"https:\/\/www.amorusolaw.com\/blog\/what-happens-to-debt-when-you-die-greenwich-ct-new-york-ny\/#breadcrumbitem"}]}]