If you’ve ever been in debt, you know how hard it is to see the light at the end of the tunnel. However, even if you DID find a way to start reasonable payments, your debt still follows you no matter where you go. Even past the grave! So, what happens to your debt when you die?
Can Debt Be Collected After You Die?
All in all, it’s hard to say whether or not your estate will have to pay up once you’ve passed on. As a matter of fact, your debt and debt recovery can indeed follow you past the grave! However, there are lots of laws and policies that regulate how debt is collected when you die.
Once you’re dead, your estate, or the assets that you’ve left behind, has the responsibility of being in charge of your debt. If you leave your estate to one person, or even several people, they are not responsible for paying off what you owe. This process is called probate.
What is Probate?
There are several things that happen once you are deceased. Your last will and testament will allow for your assets to be distributed as you please. Similarly, if you don’t have a will, then your assets will be allocated to all of your closest relatives. As well as distributed to creditors.
Probate is the legal process for dividing up your property, assets, and even accounts. This is a court-supervised process that includes the following:
- Authenticating a Last Will and Testament
- Locating assets
- Valuing all assets
- Paying final bills, taxes, as well as debts owed
- Distributing the rest of the assets to beneficiaries
Is Probate Always What Happens to Your Debt When You Die?
Not all deaths end in a probate, however. Probate is only required when estates are valued above a certain level and are not being automatically transferred to a surviving joint owner. Like if a wife died, and the husband was legally the joint owner of all of their property.
What Can I Do to Help My Family If I Die?
In addition to having a will, there are many other things you can do to make sure your family and close friends aren’t struggling with what happens to your debt when you die. It’s not necessarily difficult to put things in order for your loved ones, however it’s not always the foremost thought in people’s minds.
Write A Will
One thing you can easily do is make certain you have a last will and testament set aside for your beneficiaries. This will not only allow for you to set aside certain assets for certain people, but it can also mean not leaving a financial MESS for your executor.
Finding An Executor of Your Estate
The person primarily responsible for dealing with your will and your estate after you’ve died is called the executor of your estate. While it can be one person or several, it is always a good idea to name someone that you trust to handle writing checks to your creditors. Together with handling your debt, your executor may also see that all of your accounts, or property, are evenly distributed.
The Importance Of Life Insurance
Life insurance is a great way to make certain that your loved ones don’t have to deal with your debts when you die. Finding the right insurance that will not only cover debts but also the cost of your funeral expenses as well, will be extremely helpful.
Times When Others Are Responsible for Your Debt
There are circumstances where other people may hold the task of dealing with your creditors once you’ve passed. Primarily this only occurs when someone has co-signed for a loan, live in community property states, as well as being a joint account holder.
Laws Against Collectors and Collections
In addition to having only specific people who may have to deal with what happens to your debt when you die, there are lots of laws that protect your assets as well.
Debt collectors are not allowed to contact a dead person’s spouse, parents or guardian, or executor of the estate to talk about the debt. They are also not allowed to lie or trick the family members into believing they are not responsible for the debt.
Creditors cannot go after certain things once you’ve passed. They are not allowed to attempt to collect from life insurance policies or retirement benefits passed onto a beneficiary.
What Happens to Your Debt When You Die Can Easily Be Controlled!
If you’re looking into finding solutions for your loved ones NOW, while you’re alive, then there are lots of steps you can take to make sure it doesn’t follow your family. You can have a set will, you can take out a life insurance policy, as well as naming a trustworthy executor of your estate to handle all of your debts for you.
No matter where you go, your debt follows you. However, that doesn’t mean you have to let it follow you beyond the grave!
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