On07/10/22
By
Crow Estate Planning
When your parent passes away, one of the primary questions you may have is whether you will be responsible for your parent’s debt. Your mother or father may have had substantial credit card debt, a mortgage, or cr loan. The short answer to the question is no, you will not be personally responsible for the debt, but failure to pay such a debt can affect the use and control of secured assets like real estate and vehicles. These are important questions and issues to address regarding a parents debt, speak to family law professionals for advice in Clarksville, TN for clarity.
Responsibility for Parent’s Credit Card Debt
If your mom or dad passed away with credit card debt the good news is that you are not personally responsible for their debt. After all, you never signed an agreement to be liable for paying their credit card bill. The responsibility was on your parent.
What Credit Card Companies Will Do to Collect a Debt
Credit card companies typically will send demand letters and make several calls asking the executor or next of kin to pay this debt. Often they will assign these debts to collection agencies. These collection agencies often harass you and demand payment. But understand that credit card companies need to file a claim with the probate court against your parent’s estate in order to collect. They must prove to the probate court that they have a valid claim. It is not up to you to satisfy your parent’s debt. Creditors must go through the proper channels to get paid.
Are You Responsible for Your Parent’s Mortgage?
The answer to this question depends on whether you want to keep your parent’s property. If you do, then the mortgage must be paid by someone. Otherwise, the bank or lenderwill forecloseon the property and repossess it. Unless the mortgage balance on the house is more than the house is worth, do your best to keep the house from going into foreclosure. This is especially true if there is significant equity in the property.
If your parent’s will states the property is to be sold and divided among the beneficiaries, then generally the executor would use estate money to keep the mortgage current until the property sells. However, if the will does not direct the sale of the real estate, it can be trickier, especially if there are multiple heirs and beneficiaries.
In Tennessee, when a person dies their real estate is immediately vested in the heirs or beneficiaries of the estate, unless the will specifically brings the property into the estate to be managed by the executor. Real estate is typically not controlled by the administrator or executor through the probate process. As such, the actual owners of the real estate – those who inherited it – would be responsible for the mortgage tokeep the house from foreclosure.
Bottom line: If there is an outstanding mortgage, it needs to be paid in order to keep the property from going into foreclosure. If your parent’s will does not bring the property into the estate, then at least one heir or beneficiary that receives the property must keep the mortgage current to keep it from foreclosure. If you do not want the property, then you simply do not pay the mortgage and the bank will foreclose.
If I Do Not Pay My Parent’s Mortgage Will It Affect My Credit?
If your name is not on the mortgage, failing to pay your parent’s mortgage will not affect your credit. After all, the mortgage is in your parent’s name, not yours.
What Happens If I Do Not Pay My Parent’s Car Note?
Like real estate, a car loan is secured by the value of the vehicle. If you chose not to pay your parent’s car note, then the bank or lender can repossess the vehicle. So you will need to decide whether you wish to keep the vehicle and pay the note, or not pay the note and allow the vehicle to go into foreclosure. You could also sell the vehicle and use the proceeds of the sale to pay off the note.
Worried About Your Parent’s Debts?
If your mother or father recently passed away and you have questions regarding how to deal with their debt, give Crow Estate Planning and Probate a call at 931-218-7800. We are happy to speak with you about your situation and provide a solution to your issues.
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FAQs
You are not responsible for your parents' debt. This is true regardless of whether you inherit assets under their estate. However, a parent's estate must settle any debts before you can inherit. And children often share financial responsibilities with aging parents, often medical and housing costs.
What debts are not forgiven at death? ›
Additional examples of unsecured debt include medical debt and most types of credit card debt. If you die with unsecured debt, repayment becomes the responsibility of your estate. Your legal estate refers to all the assets, property and money left behind by you or another deceased person when they die.
Can debt pass to the next of kin? ›
If there's no money in their estate, the debts will usually go unpaid. For survivors of deceased loved ones, including spouses, you're not responsible for their debts unless you shared legal responsibility for repaying as a co-signer, a joint account holder, or if you fall within another exception.
What to do if my parents are in debt? ›
How to help your parents with their debt
- Talk with your siblings.
- Talk with your parents.
- Assess their financial situation.
- Make a plan together.
- Keep your spouse in the loop.
- Help them stick to the plan.
Are Children Personally Liable for Parent's Debts? When a parent dies, their children are not personally liable to creditors for their debt. A creditor cannot go after a child to collect on a parent's debt if there is no contractual agreement between the child and their parents' creditors.
Can your parents' debt pass you? ›
Generally, family members don't have to pay the debts of a loved one who passes away unless they're shared debts. Inherited debt repayment can vary by the type of debt. For example, secured debt, like a car loan, might be handled differently than unsecured debt, like a credit card.
Do I have to pay my deceased mother's credit card debt? ›
Credit card debt doesn't follow you to the grave. Rather, after death, it lives on and is either paid off through estate assets or becomes the responsibility of a joint account holder or cosigner.
Can you refuse inherited debt? ›
Settling an Estate
Dealing with the death of a relative shouldn't include stress created by letters and telephone calls from creditors insisting on payment. There are laws that protect people from inheriting debt, so if a credit card company solicits payment upon a family member's death, be cautious before paying it.
Who inherits family debt? ›
If the deceased was the primary borrower, the estate will be responsible for the debt. If the estate cannot pay it, though, the cosigner will be responsible.
Do I have to pay my father's debts when he died? ›
You are not responsible for someone else's debt.
This is often called their estate. If there is no estate, or the estate can't pay, then the debt generally will not be paid.
Your mother or father may have had substantial credit card debt, a mortgage, or cr loan. The short answer to the question is no, you will not be personally responsible for the debt, but failure to pay such a debt can affect the use and control of secured assets like real estate and vehicles.
Will my debt affect my parents? ›
A person's personal debts are generally separate from their parents' assets. However, there can be exceptions, such as if your parents co-signed a loan or if there are specific legal claims against their property.
How to clear parents' debt? ›
Debt Consolidation
This can simplify the repayment process by reducing the number of payments your parents need to keep track of each month. By consolidating high-interest debts, like credit card balances, into a lower-interest loan, they can save money on interest and pay off their debt faster.
Does debt transfer to the next of kin? ›
Family members usually are not responsible for a deceased relative's debts, except in situations such as cosigned debts and debts in community property states. Relatives have no legal or moral obligation to pay debts that the estate's assets can't cover, Tayne said.
Can you inherit your parents' credit score? ›
For another, kids don't actually inherit your credit score, based on your presumably long credit history. They only get the benefit of that one account. It will take them about six months to start compiling a credit score of their own. Most important, kids don't need your help to get credit.
Do I inherit my parents' medical debt? ›
Medical debt for the deceased is paid by a person's estate — if the estate has enough assets. An estate with enough assets to pay any or all debts is considered “solvent.” If an estate does not have enough assets to pay debts, it is considered “insolvent.” Survivors are not responsible for medical debt, in most cases.
What type of debt Cannot be erased? ›
Filing for Chapter 7 bankruptcy eliminates credit card debt, medical bills and unsecured loans; however, there are some debts that cannot be discharged. Those debts include child support, spousal support obligations, student loans, judgments for damages resulting from drunk driving accidents, and most unpaid taxes.
What assets are protected from creditors after death? ›
Retirement Accounts, Insurance, Trusts
Retirement account assets and insurance proceeds with designated beneficiaries are treated differently than other assets and provide more protection from creditors.
What debt is unforgivable? ›
Regardless of whether you're seeking out a Chapter 7 or a Chapter 13 bankruptcy, not all debt is eligible for discharge. For example, taxes, spousal support, child support, alimony and government-backed student loans can't be discharged in bankruptcy.
Can debt collectors go after the family of deceased? ›
If you are the executor or administrator of the deceased person's estate, debt collectors can contact you to discuss the deceased person's debts. Debt collectors are not allowed to say or hint that you are responsible for paying the debts with your own money.
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