Death is a sad process that each one of us goes through at some point. Sometimes death can be sudden; but, for those who know about how long they have left, debt can add a lot of stress to an already stressful situation.
Leaving a family behind is hard, especially if you worry about them financially. Many questions can arise, such as, “what happens to your debt after you die”. Debt and other such worries are very hard on the family unit as they go through this hardship together. Luckily there are ways to handle your finances to ensure your descendants’ financial stability.
Though we can acquire a substantial amount debt in our lives, the good new is that debt doesn’t follow you after you die. While we pass away and the stresses of finances are no longer with us, our families can often be forced to reconcile all we have left behind. More often then not, after our death, our families will be battered with debt collectors. There are a lot of things that affect what happens to your debt after you die. However, knowing what happens to one’s debt is a good way to ensure that family members can live happy and stable lives even after we pass away.
Credit Card Debt
We use credit cards almost everyday of our life. Whether we’re buying clothes, buying a meal, or paying for our child’s schooling, owing money to the credit card company is nearly unavoidable. That Visa credit card can become very heavy in our wallets as we seem to acquire debt simply by breathing. It is not unheard of for many to stack up thousands of dollars as a result of poor budgeting. And as such people can become very worried at the thought of their family inheriting that debt; therefore, it is important to know what happens to your debt after you die.
The good news with credit card debt is that, most of the time, our family is spared from having to pay it off. Now, before you decide to swipe that credit card as many times as you can within your last few years, it is important to know that sometimes family members are held liable. There are several different scenarios that could affect our family.
You have a Cosigner
Cosigners can be awesome; especially if you’re young and need to build your credit. If you’re young, having a co-signer could mean having lower interest rates. However, the cosigner often takes on a lot of the risks. There are several things that you need to consider before signing as a cosigner.
Cosigning on anything could negatively affect your credit if things are not paid off properly. And, in case of a death, cosigners are susceptible to pay off any amount of credit card debt that was acquired by the deceased.
If you are aware that you do not have any way to pay off the debt, knowing when to hire a financial advisor or having access to one can be very helpful. In most cases, if the breadwinner dies, a financial advisor can omit the leftover debt or can argue a lower interest rate to save you money
Rest easy, any and all authorized users. You’re in the clear. Only Cosigners are required to pay off credit debt. However, it’s important to be knowledgeable. Even if you are not required to take on your loved ones debts, many credit card companies will try to get you to pay anyway.
One of the harder things to leave behind is your home. If your house has not been paid off by the time you pass away, the bank can foreclose. Luckily, before they foreclose on your house they will offer a warning and authoritative counseling. This will give your family time to find a place to relocate. However, there are some exceptions which will allow your family to keep the house.
Exceptions to foreclosure
- If you are a co-owner
- If you inherited the house
- …And if you take over payments
If you leave a family behind when you pass away, not only can you be burdened about what will happen to your debt after you die, but you can also worry about your family’s living conditions. Proper planning and forethought is very important when considering what will happen to your debt after you die because you can ensure that your family has a roof over their heads and can mourn your loss without having to worry about your debt.
It is easy to determine what will happen to your debt when you die because in most instances, rules regarding debt are very straightforward. Mortgage debt and auto debt are very similar and both relatively simple. Without proper payment, the vehicle will be repossessed by the ban and will not be able to place a financial burden on any existing family members. However, if you are an immediate relative (spouse, parent, child, etc.) and are willing to take on payments for the vehicle, it will not be repossessed.
[Read: Debts You Should Pay Off]
If you manage and plan out your finances, you can determine what will happen to your debt after you die. Thankfully, it is easier to gain assests rather than debt when a loved one passes away.