The death of a parent or a person with an estate often requires the paying off of debts. This task can fall to the surviving children, to a spouse or to a personal representative named in an estate plan.
Each state outlines the steps that both estates and creditors must follow for this process.
Death does not necessarily end debt obligations
According to information from the Consumer Financial Protection Bureau, the deceased person’s estate remains responsible for outstanding debt. If the deceased has no money left, the debt obligations generally end at this point, and the creditor will not receive any payment. In other words, state law will not compel, in most cases, a survivor to pay off another person’s debts.
A few exceptions do exist, though. These include situations where joint account owners have a debt, and one of these owners remains alive. Loans that have a co-signer might also require the payment of the loan. Individuals uncertain about the status of a debt can contact the creditor for additional information.
Death and the responsibility of the personal representative
If money remains in the estate, the personal representative has a responsibility to pay off creditors from these assets. This could entail looking through the paperwork of the deceased and discovering what debts remain, and contacting the creditors.
Creditors typically must file a claim with the probate court within three months of hearing of the debtor’s death. If the claim has validity, the personal representative should then pay the debt from estate funds. A solid estate plan allows for the orderly payment of outstanding debts upon death.