For many people in California and throughout the U.S., dealing with the loss of a close friend or loved one is often overwhelming. Not only is it difficult to process emotions that come with a loss, but settling the estate and other affairs may seem daunting.
Whether you have the responsibility of acting as estate administrator, or you share an account with the recently deceased, it is helpful to know what happens to the property, assets and debt left behind. While property and assets get distributed to beneficiaries named in the last will and testament, many are not sure what happens to the debt after one passes?
Types of debt
Contrary to what some may think, many debts do not simply disappear once a person passes. According to Nerd Wallet, the following unsecured debts may still exist depending on the circumstances surrounding the situation:
- Credit card expenses
- Student loans
- Medical expenses
With these types of unsecured loans, creditors are not able to collect the remaining balance if there is not enough money to pay for the funds through the value of the estate. Creditors in charge of secured loans, such as home equity loans, mortgages and car loans, may reclaim property if it is not paid for in full.
Once the trustee or executor determines the value of the estate, he or she pays any remaining debts out of the balance. Typically, family members are not responsible for repaying estate debts. In some cases, the responsibility of repaying debt may fall on someone other than the deceased. This may include a co-signer on a loan or a joint account holder on a credit card. The spouse of the deceased may have to repay any debt not covered by the estate’s value. This is often the case in community property states.