What happens to debt when someone dies?

When you live in New York and someone gives you the responsibility of handling his or her affairs after he or she passes, you will need to take certain steps to do so while you manage your loved one’s estate. This might include paying off debts, making distributions to beneficiaries and so on, but what happens when the person who dies leaves considerable debt behind?

According to U.S. News & World Report, one out of every five Americans has  credit card debt he or she believes he or she will never be able to pay off, and that means more and more U.S. residents are dying without covering their debts. If your loved one had enough to cover those debts tied up in other assets, it should not be difficult to pay that debt off, but when someone dies with debt he or she cannot cover, what happens next depends on the type of debt accrued.

If your loved one left behind substantial credit card debt, for example, and he or she does not have other assets to help cover the debt, you should not have to worry about being responsible for it in most cases. There is, however, an exception to this. If you co-signed on the credit card, you may be on the hook for the balance, but otherwise, think twice before letting credit card companies guilt or pressure you into paying.

If your loved one passed away and left behind, say, automotive debt, you can either take over the payments for the vehicle or let the bank take it back. In the case of mortgage debt, you may be able to hang on to your loved one’s property by taking over the payments yourself. Otherwise, the bank will typically foreclose on the property eventually.

This information about what happens when someone dies with debt seeks to inform you, but it is not a replacement for legal advice.