Death in Debt: What Happens to Your Debt When You Die

What happens to your debt if you die without paying it off? Well, there are many conditions that surround the case and there is no definite guidelines as to what happens to your debt when you die as it depends on several factors such as what the debt is, to whom it is owed, etc.

However there are basic steps that generally followed when this happens. And they are the following:

1) After you die, your estate is born. Your estate is the totality of your assets. Usually, the assets are turned into cash. Properties are sold and the remaining money to your name is added to create your estate.

2) Your estate will be the one to pay off debts in order of importance. Typically, debts on the funeral expenses, taxes, and secured debts are paid off first. Then credit card debts are usually at the bottom of the chain. If there is still some left to the estate after paying off all debts, then the remaining balance are distributed to the respective beneficiaries.

3) In case the estate is unable to pay off all debts, the remaining debts are usually written off.

4) The beneficiaries are not usually responsible for the debt of the deceased. However, there are rare circumstances in which they will be legally obligated to bear the debt.

Owing a debt after death is unfortunate but it is not supposed to haunt you in the afterlife. The best solution is still prevention. If you can, don’t be in debt. Pay it off as early as you can so you and your family can enjoy a life and death that is debt-free.