Bankruptcy Law, Credit, Debt Relief, Student Loans, Timothy Kingcade Posts

What happens to your debts when you die?

Your debts become the responsibility of your estate. When you pass away, any debts you leave behind could take from the assets you had hoped to leave your loved ones.  In some cases, family members can even be responsible for your debts. This is the reason many people purchase life insurance- not only to leave their loved ones something when they pass, but also to take care of any outstanding debt and final expenses.

Mortgages and home-equity loans

If the property has a mortgage, the lender does have some protection, at least up to the value of the property. However, federal law states that lenders cannot force the joint owner to pay off the mortgage immediately after the co-owner dies.   This also applies to any relative who inherits the home and lives in it.  This means the family member or co-owner can simply take over the monthly mortgage payments.  If there is an outstanding home-equity loan, a lender can force the person who inherits the home to repay the loan immediately, which could result in the home being sold.

Auto loans

If the vehicle is not paid in full, the lender has the right to repossess the car.   But typically, whoever inherits the car can just take over the payments.  It is unlikely the lender will take action.

Credit cards

When the estate runs out of assets, the credit card companies are out of luck.  This is due to the fact that credit card debt is not secured by assets the way mortgages and car loans are.  Any joint account holder would be responsible for the bill, but people who are simply authorized users of the card would not be.

Student loans

Lenders do not have any recourse if the estate does not have assets to repay other unsecured obligations, like student loans.   Even if your relatives are not responsible for your debts, collection companies can still legally call to discuss the debts to find someone who is authorized to pay them, according to the FTC.  It is important to know, debt collectors cannot mislead family members into thinking they are responsible for the debts.


These are the circumstances in which spouses or other people would be responsible for your debts.  These include:

  • They co-signed on a loan;
  • Are joint account holders;
  • Are spouses in community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

What is protected?

Creditors typically cannot go after your retirement accounts or life insurance proceeds.  However, if the life insurance beneficiaries you named are no longer living, your death benefit may go into your estate and then be subject to creditors.  That is one reason why it is important to make sure your policy names the proper beneficiaries.

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If you are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website