What happens to your debt when you die? Can you inherit your parent's debt? Will your children inherit your debt? Though not a pleasant topic, it's one that deserves discussion.
As a general rule, debt is not inherited. However, if you are a cosigner on a loan or credit card, for example, you would be responsible for any outstanding balance.
If the deceased has a trust, the executor of the estate will pay off debt before distributing assets to beneficiaries. Creditors are required to file a claim against the estate within a specific timeframe in order to receive funds. Unless it's a significant amount, most creditors don't take the time to do so. It is important to note that if an asset is used as collateral (a vehicle loan or home mortgage, for example), the asset can be seized.
The laws regarding debt vary by state and debt collectors may continue to pursue restitution. Learn more about the limitations on what debt collectors can and cannot do. Make sure you know your legal rights before making any decisions.
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