A recent report by credit.com revealed that most Americans die with debt in their name. You are likely to pass on with at least a bit of money owed to a bank or a credit card company. The average amount is $62,000 for those with a home loan and $13,000 for those without one. Over 73% of all people will die with an outstanding loan of which 68% had credit card loans, 37% had mortgages, 25% auto loans, 12% personal loans, and 6% student loans. That being said, the question remains, what happens to that money and what happens to the loans? What happens to your debt after death?
Debt after death
Once the person dies, the loans on them also go away. The debt actually dies with you, but will not leave the people you leave behind. Debt remains with the person and their estate including the people who are part of that estate. So, when a person dies and leaves behind assets, the benefactors of the person will get what remains after the creditors have taken what is owed to them. If there is not enough to satisfy all the debt, then everyone loses out. The immediate family will not be held responsible. It is a common misconception, but the family will not be made to pay the debts of their lost loved ones.
The idea is again not set in stone. Depending on the type of loan taken, duration, and the amount taken, the family may still feel the burden of the debt. Think of a mortgage, for example. If you pass away and your family lives in the house, either they take up the payment or the bank will take the house, sell it, take their money and give your family the remaining amount. Student loans are normally written off, but personal loans will come to the estate. Getting a life insurance policy is one of the best ways to keep your family from feeling the brunt of your debts after you pass.
If you are suffering hard times, we understand what you are going through. Contact our Dayton bankruptcy office for support and guidance through this tough time.