Many people in Parsippany carry some type of debt these days. Debt can take many forms: a home loan, an auto loan, credit card debt or student loan debt, to name a few. Most people will do what they can to pay off their debts during their lifetime. However, sometimes this simply doesn't happen and a person passes away before all their debts are paid off. When this happens, will the debtor's survivors be obligated to make good on the debts owed?
In general, any debts a person still owes after their death will be repaid via that person's estate. This is true even in the absence of a will. This means that, in most circumstances, when a person dies their survivors will not have to repay their loved one's debts. However, there are exceptions.
One exception hinges on whether or not a survivor co-owned the debt with the deceased or whether the survivor gained a substantial benefit through the debt. Take credit card debt, for example. If a card is held jointly, the co-account holder would be responsible for the remaining credit card debt. Similarly, if a person co-signed a loan with the debtor, after the debtor passes away that co-signer may be responsible for the remainder of the debt.
Also, if a mortgage is in both spouses' name and one spouse dies, the home loan is not simply forgiven. The surviving spouse can choose to continue paying off the mortgage and keep the home. Alternatively, the surviving spouse can sell the home and pay off the mortgage with the proceeds from the sale.
Every person's situation is different, so those who have further questions about whether they will be responsible for the debts of a loved one are encouraged to bring the matter up with an estate administration and probate professional.
Source: FindLaw, "Debts After Death," accessed Feb. 11, 2018