14 Nov Debt In the Event of Death
Once death strikes you, you will have no other option other than to leave behind your family, incurred debts and your legacy to the bereaved. Whatever happens to the debts once you’re no longer remains a question in the minds of many. In general, all your acquired assets and debts will be part of the estate whereby now the estate will take responsibility of paying them. The money that remains is channeled to your heirs. In the case there is not sufficient money to repay back debts, they will remain unpaid.
It tends to be somehow technical, but with some fix, the family members will be able to maneuver on such technicalities. Here are a few things that you need to have at the back of your mind:
SETTLING THE ESTATE
A will draft by the deceased typically mentions an executor, who will stand responsible for the settlement of his related financial affairs. In case there is no written will, then someone will need to apply to the relevant court to be appointed the Estate Trustee. There is a pecking order that should be paid first. It is stated that secured debts like auto loans or mortgage ought to be considered first, and thereafter to be followed by unsecured debts, such as credit medical bills and credit card.
Banks expect payments for a mortgage because they will take action by giving penalties. There is assured protections to family members or other individuals living within the home. Financial institutions are prohibited from automatically foreclosing whenever a home owner meet his/her untimely death.
Similar protection is assured to automobiles that go unpaid in full amount. However, lenders are not allowed to take back a car as long as it is being paid for. Rules differ from one area to another in the way in which assets are protected and which are not. So it will be wise enough to consult a lawyer.
If you claim the credit card alone, then you should also be ready to claim the debt even in death. In that case, therefore, the estate will take care of it. If it is a joint account or there is a co-signer, there is the likelihood of the other party being held responsible for the balance as well. But if you’re just an authorized user, you’re likely not to pay.