Many Americans owe money, and some of them die in debt. When a person dies in debt, the creditor may be able to recoup it from the estate. However, survivors are not necessarily responsible for a deceased loved one’s debt. If one of your loved ones has died in debt, understand what can and cannot be collected legally so you can protect your rights and avoid paying money you don’t owe.
The State of American Debt
According to Experian, U.S. consumer debt reached $17.57 trillion in the third quarter of 2024. Generation X is responsible for the lion’s share of this debt at $6.51 trillion, while Millennials are responsible for $5.23 trillion and Baby Boomers are responsible for $4.5 trillion. Gen Zers only have $0.77 trillion in debt, and the Silent Generation has just $0.53 trillion.
The average consumer debt balance is $105,000.
Many people don’t expect to pay off their debt, at least not in its entirety. A poll from Policygenius found that 58% of people earning at least $150,000 in annual household income expect their loved ones to inherit their debt when they die.
However, this may not happen. Although creditors may have the legal right to collect money from the debtor’s estate or from a survivor who is also responsible for the debt, it’s not typically possible to inherit debt.
Debt and the Probate Process
After a person dies, the person’s estate typically needs to go through probate. This is a legal process in which the person’s debts are paid and then the remaining assets are distributed to the heirs according to the will and/or state law.
Debts are paid first in probate. If the person’s debts exceed the person’s assets, the estate is considered insolvent, and there’s nothing left for the heirs to inherit.
This means that a person’s debt can negatively impact their estate and what heirs are able to receive, but it is not the same as the heirs inheriting the debt. A key difference is that the heirs are not automatically responsible for paying any remaining debt after the estate has been declared insolvent.
When Survivors Are Responsible for Debt
Although you don’t typically inherit someone’s debt, there are times when a survivor may be held responsible for a debt. This typically happens when the survivor is tied to the debt in some way, for example, because they were a co-signer. Creditors may also be able to go after joint accounts held by the deceased and a survivor.
When it comes to spouses and parents, state law determines whether a survivor can be held responsible for a debt. The Consumer Financial Protection Bureau (CFBP) says that some states have necessaries statutes that can hold parents and spouses responsible for certain costs that are deemed necessary, including healthcare. However, the CFPB also says that some states have enacted laws to shield surviving spouses from debt.
In community property states, spouses are jointly responsible for any assets or debts acquired during marriage. This makes the surviving spouse a co-owner of the debt and thus responsible for it after the other spouse’s death. Experian says Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin are community property states. In California, Nevada and Washington, community property law also applies to domestic partnerships. Oregon is not a community property state.
There may also be exceptions for specific types of debt. For example, federal student loans are discharged if the borrower dies and proof of death is submitted. Parents who take out PLUS loans can have their loans discharged if either they die or if the student dies.
Creditors May Call You
If a loved one dies with debt, you are not typically responsible for it, but this does not necessarily stop creditors from calling you in an attempt to collect. In some cases, they may not realize the debtor has died. In other cases, they may know, and they may be trying to recover the debt from survivors – whether or not the survivors are legally obligated to pay it.
The CFPB says that debt collectors often go after surviving spouse’s to collect unpaid medical debt, and although they may be legally entitled to do so in some states and under some circumstances, it appears that they sometimes attempt collection without considering the nuances of the law and the spouse’s legal rights.
Creditors may sometimes try to recover other types of debt as well. In one egregious example, NEWS 4 San Antonio says an apartment complex sent a bill to the family of a tenant who died, attempting to collect $15,676 because she broke her lease when she died.
What to Do If a Loved One Dies in Debt
If a loved one dies in debt, understanding your rights and responsibilities can help you avoid problems.
- Inform any debt collectors who call you that the debtor has passed away. They may not be aware of this.
- Don’t assume you are responsible for a debt. Even if a debt collector tries to get you to pay or claims that you are responsible, don’t pay until you’ve determined what the law says.
- If a debt collector is harassing you, report the problem to the FTC or your state attorney general.
- If you are the executor of the estate, you are responsible for putting out a notice and paying debts before you distribute assets. Some types of debts are prioritized above others.
Do you need help navigating probate and your rights and responsibilities after a loved one dies in debt? The laws governing estates and debt can be complicated, but an estate planning attorney can help. Contact Skinner Law.