When her husband Marcus died of a heart attack at 39, Elena was left with more than grief.
The Seattle schoolteacher was suddenly a single mom with two small kids. She was also saddled with massive debt, including a $340,000 mortgage, a joint home-equity line of credit (HELOC) with a $50,000 balance and a shared credit card with $20,000 outstanding.
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Marcus, an impulse buyer, had also accumulated $70,000 of his own consumer debt and taken out an additional $10,000 private loan that Elena had co-signed. Unfortunately, the couple didn’t have life insurance, and their emergency fund barely covered funeral expenses.
You can’t put a price on losing a loved one, but you can put a number on their unpaid debts.
Knowing which ones you may be responsible for is critical.
The truth about debt after death
Typically, a deceased person’s debt doesn’t pass to their surviving spouse or children.
But there are exceptions.
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If a debt was solely in the deceased person’s name, like Marcus’s consumer debt, it’s paid out of their estate, which is the sum of their assets, such as savings, investments and property.
If the estate doesn’t have enough to cover those debts, the surviving family isn’t usually on the hook and the debt will typically go unpaid.
In the case of federal student loans, the student loans are discharged upon someone’s death.
If it’s a car loan, the car may be repossessed.
One exception where you may be on the hook is if you co-signed the loan, like Elena did with Marcus’s $10,000 personal loan, or held debt jointly, like Marcus and Elena’s HELOC and shared credit card. In these cases, you are legally responsible for the full balance.
Another exception? Community property laws in states where both assets and debt are considered the joint property of married couples, even after one spouse dies.
As the Federal Trade Commission warns, you need to be aware of community property laws if you live in Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Elena’s home state of Washington or Wisconsin.
Moreover, in some states, a surviving spouse may be responsible for paying a loved one’s debt related to their health-care expenses.
The good news is that debts aren’t typically due right away.
When someone dies, their estate has to go through probate — the legal process of validating a person’s will, settling their debts and distributing remaining assets in their estate. Creditors have three to six months to file a claim against the estate.
How to handle debt left by a loved one?
If, like Elena, you’re suddenly responsible for big bills after a loved one’s death, you’re not alone, and you have a few options.
Negotiate. Creditors may accept partial payment for settlements, especially for private loans or credit card debt.
Check for loan forgiveness. Federal student loans are discharged upon death, and through 2025, that forgiven amount isn’t considered taxable income.
Consider bankruptcy. If you’re stuck with debt that you just can’t repay, like large joint loans, bankruptcy may help you wipe the slate clean and restart. This step should only be considered as a last resort, as it can lead you to lose precious assets such as your home and make borrowing in the future very difficult.
Before committing to any of these, consider meeting with a financial advisor or an estate lawyer to help protect your assets and come up with a manageable plan.
Losing a loved one is devastating enough without worrying that you’re going to have to inherit a financial mess to untangle. You can ensure your own loved ones don’t face such a situation by preparing ahead of time.
Ensure you have:
- An up-to-date will, and readily accessible copies of important documents and communications for your loved ones, executor or estate attorney.
- An active life insurance policy.
- Up-to-date beneficiary information on life insurance, IRAs and retirement accounts.
- Clear documentation of debts you share jointly or under your name.
- An emergency fund that could cover three to six months’ expenses — including emergency expenses like a funeral if required.
While you can’t predict the future, you can prepare for it so that you don’t leave a legacy of debt behind.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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