What Happens to Debts After You Pass Away?

Are you wondering what will happen to the debts you owe once you are no longer around to pay them? This depends primarily on the types of debts you have and the laws in your area about how those debts should be prioritized.

Below is a quick overview of some of the most common types of debts and what happens to them if you pass away:

Mortgages: Any loans attached to property, such as mortgages, must be paid in full. Typically, the person who receives the property will take the property subject to the mortgage on that property, but you can also arrange to have the debt paid out of your estate.
Credit cards: Credit card debt is the most common type of debt that gets left behind by deceased individuals. Your estate will be required to pay off this debt in most cases, but sometimes companies will write off some or all of the debt if the estate does not have sufficient funds to pay them off.
Auto loans: Vehicle loans must be paid if your heir wants to keep the vehicle. Any person who receives a vehicle will take the vehicle subject to the loan which gives him or her the responsibility for paying those loans unless you arrange to have the debt paid from your estate.
Business debts: Responsibility for paying off business debts depends on the structure of your business and if you have any personal liability for your business debts.
Child support: Any child support debts may still be required to be paid off by your estate. The surviving parent or guardian of the child or the state agency enforcing child support may file a claim against your estate to recover the money owed.
Private student loans: Student loan forgiveness depends on the terms of the loan. Sometimes, the terms require repayment, while sometimes they do not.
Medical bills: Medical providers typically make claims for payment out of the estate for any outstanding medical bills.
No personal liability: The important thing to remember is that loans secured by a mortgage or other lien on your property will be paid either by the heir who receives the property, or by foreclosure of the lien or by arrangements you make in your will. But, none of your estate beneficiaries incur personal liability for your debts if your estate assets are not sufficient to pay your final debts and taxes in full.