Guest Post From Nicholas Green of DCU:
Follow him on Twitter: @nichola41408778

We are all worried about our parents. 
We try to love them and care for them as much as we can. 
We want to take up their responsibilities and make them free of all burdens.

But, when the question is about being responsible for their debts once they leave this world, it might turn out to be a pretty messed up situation. This is the last liability you want to carry for your parents.

Debts after death is a very complex condition, that needs proper evaluation and understanding.

Whether or not you will inherit your parents’ debts upon their death, is measured by several factors, that you should be aware of.

Being Thrifty Rich is about knowing how to best spend the money that needs to be spent. Parental debt, while something we don’t want to think about, is something you can minimize with the right steps and get help with. Please leave your replies below on what you encountered and what you have done that may help others.

What happens to secured debts after death?

Secured debts are mortgages, auto loans and any other form of credit backed by an asset or some sort of collateral security.

These debts have one simple principle, which is, upon default the creditor will take away the secured asset from the debtor so as to compensate for the debt.

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Therefore, you can pretty much guess what happens, when your parents leave behind an unpaid mortgage to his/her name, after death. The lender will simply get the home back. And, the loan gets cleared.

But, if you want to keep the house, then all you have to do, is keep up with the loan payments just as per the original loan agreement.

Now, if the deceased person made a will, that states the transfer of the secured property to your name, upon death, then you are by default liable to pay off this loan when the asset is not owned outright.

The same theory is applicable to car loans and other types of secured debts. 


But, if you don’t want to hold onto such debts or properties after your parents’ death, then just a mere application to the creditor explaining, that you don’t want to continue with the debt obligations, will remove your name from that debt.

However, if you co-borrowed or co-signed a secured loan with your parents, then again by default you are liable to pay off the loan in the absence of our parents.

What happens to unsecured debts, like credit cards and medical bills?

Unsecured debts are mostly consumer debts, and they are also considered as low priority debts.

They have no asset potential, and mostly they go unpaid upon the debtor’s death. Creditors of these debts are always at a greater risk of loss than those of secured debts.

There are little to no chances of you inheriting these debts from your parents after they die.

But, if you have co-signed any credit card with your parent, then you are legally liable to take care of it.

The same goes for medical bills. They are also low priority debts, and the fate of all these consumer debts will be decided by the court, depending on the estate valuation of your parents, after their death.

What is the estate?

When a person dies, they leave behind properties that make up the total estate.

The estate will then be evaluated by an executor upon the court’s order. If the estate holds the capability to pay off the debts as per the state laws regarding estates and probates, then some or all of these unsecured debts will be paid off by the liquidation of the estate.

But, if you by any chance inherit these unsecured debts, then don’t forget to surface out the available debt consolidation options, to pay off these debts faster and save good amounts on the payments.

What happens to the tax debts and student debts?

Tax debts are high priority debts, and the first thing the estate will pay off is these debts. However, if an estate turns out to be insolvent, then probably these debts will be forgiven.

But, the whole thing depends on the tax laws. It’s better that you consult a lawyer, and discuss all estate, tax and probate laws in full detail.

Student loans, on the other hand, are way more critical, and if your parents are leaving behind such debts, then things should be handled carefully.

Keep in mind, federal student loans usually get discharged upon the borrower’s death, but private loans may not carry the same benefit.

Hence, whatever situation you are in, don’t try to encounter it alone, unless you are yourself a lawyer.

You let the probate court decide the estate, and let it take care of the debts and assets!

This is a great start to understanding the types of debts that you could be responsible for after the passing of your parents.  It is important that you understand how each debt is handled, your legal responsibilities, and most importantly how you need to handle them.  Also, know that these debts are negotiable and can be reduced with either simple calls are services like our Guest provides.

First and foremost, don’t ever just agree to let the debtors take any amounts owed from the estate or pass the obligation to you.  They have very clever legal resources and can reduce an estate to nothing very quickly.  Take your time, hire the right firms depending on your situations, and be diligent.

 About Our Guest Post Author:

Nicholas Green helps provide advice on Debt Consolidation and other debt related matters.  He runs http://www.debtconsolidationus.org if you need advice or services related to consolidating debt.

 

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