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What happens to thier debt when someone dies?
Myhusband recently passed and left behind about $6000 in credit card debt and $3000 left on a car loan. He had no life insurance or assets of anykind. All of the forementioned debt is in his name only. So, what happens to that debt?
The car loan was an old loan from a car that was totaled and insurance only covered $18,000 on a $21,000 loan...so the car no longer exists, just the loan.
As a probate collector, I believe I have the answer for you.
One, if he is the only one on the debts, he or his estate are the only ones actually responsible for the debts.
Two, if there is no estate & no insurance or assets & the family does not want or isn't able to work with the creditor, the balance is written off by the creditor.
Three, living in a community property has NOTHING to do with debt of the deceased.
Four, IF you wish to make arrangements, the arrangements are VOLUNTARY. You would need to verify that the balances have stopped building interest. Technically, the balances should be stopped at the date of death but some creditors try to get the estate or family to pay continuing interest.
Since there are no assets to file a probate about, there would be no estate. No assets to sell or insurance to cash in means no funds to pay. A totaled car means no asset.
This all means there is no one financially or legally responsible for the debts. Morally, that would be up to you to decide. If you decide to pay, make payment arrangements at a rate you can afford. Even if this means $10/month for 15 years, that would be up to you (I have 3 accounts currently doing just this. The husband believes he should pay his wife's bills off but is unemployed & can only afford $10/month per account)
Source(s):4 years ago
Whenever someone dies and leaves debts behind, a designated person (called an executor or administrator) handles the estate. If the deceased person did not have a will and was married, then, in many states the spouse automatically assumes responsibility for the estate and, becomes responsible for paying off the debts on his or her own. If the deceased person did not have a will and did not have a living spouse, then usually a close relative (son, daughter, mother, father, or a grandparent) is appointed as the executor of the estate according to state law. If there are no relatives, the state appoints an executor.
Even when an estate is worthless, the executor must still notify all creditors of the death. Debts from a worthless estate are generally charged off and no future collection actions are taken. However, as stated earlier, in some states a living spouse can still be held responsible for paying off the debts of their deceased spouse.
Always check your state laws and always consult with a probate attorney.
When the estate is worth something, the debts must be satisfied according to federal and state priority. For instance, debts owed to the federal government take first priority and then state governments debts and after that, it depends on the types of debts and whether or not there is a will. Assuming there is a will, its instructions are followed and then comes secured debts, liens, judgments and finally unsecured debts. Here are two relevant excerpts from federal code...
"Section 3466 provides: 'Whenever any person indebted to the United States is insolvent, or whenever the estate of any deceased debtor, in the hands of the executors or administrators, is insufficient to pay all the debts due from the deceased, the debts due to the United States shall be first satisfied; and the priority hereby established shall extend as well to cases in which a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed, or absent debtor are attached by process of law, as to cases in which an act of bankruptcy is committed.' "
"Section 3467 (Comp. St. 6373) provides: 'Every executor, administrator, or assignee, or other person, who pays any debt due by the person or estate from whom or for which he acts, before he satisfies and pays the debts due to the United States from such person or estate, shall become answerable in his own person and estate for the debts so due to [269 U.S. 483, 487] the United States, or for so much thereof as may remain due and unpaid.' "
Depends on the state laws where you live.
Also depends on if someone else "assumes" the debt.
Best line of defense to collectors would be, "I don't know anything about this, did not incur it and cannot pay it." Have them mail you a request for the death certificate and then send it to them once you receive their request in writing.
NEVER agree that he owed it, NEVER agree that you "should be" responsible.
Collectors have gotten really filthy about guilting people into paying the dead's debts.
Sorry about your loss.
Your premise that he had no assets is technically false. If he had a car loan, then he had a car. A car is an asset.
The car and any other assets must be sold and the money raised must be used to pay as much of the debt as possible. The remainder of the debt dies with him.
You are not obligated to use any of your own money or future earnings to pay the debt unless either (a) you keep any of his assets, including the car, (b) you jointly owed the debt while he was alive, or (c) you cosigned the debt.
It depends upon whether you live in a "community property " or "common law property" State.
Here is a website, just read what it says under "debts" in each type of state.
THe debts go to one person of his family.by LOL14 - 4 years ago
charged to his estate.by Visualize Whirled Peas - 4 years ago
TO: The Wife
Dude I hate Stupid retarted laws like that they put your son or famly in charge of he or her dept
WHY CANT THEY FORGIVE AND FORGET
That really sucks for you, I knew a rich guy *muli millionaire and some guy was crying for money cuz he just lost EVERYTHING and (theres more to the story im to lazy to write) Ok Fast Fowerd The rich guy helped him out and got him a house and other stuff i heard, So bacily if you get all his dept ask a local charity or church, or rich guy and I am 100% positive that they will help you out
PS Have a relative steal everything in your house and call insureance and they pay for everything and then get all your stuff back That realy works but I know its illeagal but its a good choice