When Someone Dies, Who Pays the Bills? Understanding Debt and Estate Planning

When a loved one dies, it can be a very emotional and confusing time. Along with grief, there are often many questions about money, especially when the person who passed away had debts. Many people wonder: What happens to someone’s debt when they die? Do the family members have to pay it? Does it just disappear?

In this blog post, we’ll explain what usually happens to a person’s debt after they pass away and how estate planning can help make things easier for loved ones. At Grant, Riffkin & Strauss, P.C., we help families navigate these situations with clarity and confidence.

What Is Debt?

Debt is money that someone owes to another person or company. It can include things like:

• Credit card bills

• Car loans

• Student loans

• Mortgages (home loans)

• Personal loans

• Medical bills

Most adults have some kind of debt during their life. But what happens to it after they die?

Does Debt Go Away When You Die?

Not exactly.

When someone dies, their debt doesn’t just disappear. However, family members usually aren’t personally responsible for paying it—unless they co-signed the loan or are legally connected to it in another way.

Here’s what actually happens:

1. The person’s estate becomes responsible for the debt. The estate is everything the person owned when they died—like money, property, and personal belongings.

2. The estate goes through a process called probate. During probate, debts are paid off first using money or property from the estate. Anything left over is then given to the heirs (family or others named in the will).

So, in short: the estate pays the debt, not the family.

What If the Estate Doesn’t Have Enough Money?

Sometimes, the person who died may have more debt than money or assets in their estate. In that case, the estate is called insolvent.

When this happens:

• Some debts may go unpaid.

• Creditors (the people or companies owed money) may not get everything they’re owed.

• Heirs usually don’t receive anything.

But again, unless a family member is legally responsible (like being a co-signer or joint account holder), they don’t have to pay the remaining debt from their own pocket.

Are There Exceptions?

Yes, there are a few important exceptions to know about:

1. Co-signed Loans – If you co-signed a loan with the person who died, you are still responsible for paying it.

2. Joint Accounts – If you share a credit card or bank account, you may still owe the balance.

3. Community Property States – In some states (like California, Texas, and a few others), spouses may be responsible for debts taken on during the marriage, even if the debt was only in one person’s name.

At Grant, Riffkin & Strauss, P.C., we can help you understand if any of these exceptions apply to your situation.

What Happens to Specific Debts?

Let’s look at how different kinds of debt are handled after death:

• Credit Cards – These are usually paid from the estate. If there’s not enough money, the rest may go unpaid—unless someone else is a joint cardholder.

• Mortgages – The lender may allow someone else (like a spouse or child) to take over the mortgage. If no one can pay, the house may be sold to pay off the loan.

• Student Loans – Federal student loans are usually canceled when the borrower dies. Private student loans are different—they may still need to be paid by the estate or co-signer.

• Car Loans – The car can be returned, sold, or taken by the lender if payments can’t continue.

• Medical Bills – These are treated like any other debt. They are paid from the estate, if possible.

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How Can Estate Planning Help?

Estate planning is when you make a legal plan for what happens to your money, property, and responsibilities after you die. A good estate plan can help manage debt and protect your loved ones.

Here’s how:

• Make a Will – A will says who should get what after you die. It also helps the court know who should handle your estate.

• Set Up a Trust – Some people use a trust to avoid probate and help manage debt and assets more smoothly.

• Get Life Insurance – A life insurance policy can help your family pay off debts or cover costs after you pass away.

• Keep Good Records – Keeping track of your debts, accounts, and important documents makes it easier for your family when the time comes.

Working with a law firm like Grant, Riffkin & Strauss, P.C. ensures that your estate plan covers all the important details, including how to handle debts.

Final Thoughts

No one likes to think about death or debt, but understanding how it works can make a big difference. When someone dies, their estate usually takes care of the debts—not their family members.

By planning ahead and speaking with an estate planning attorney, you can help your loved ones avoid stress, confusion, and financial problems down the road. At Grant, Riffkin & Strauss, P.C., we’re here to guide you through every step of the process.

Want to learn more about protecting your family and planning for the future? Contact us today to schedule a consultation or explore more of our blog for helpful tips.