What Happens to Your Debt When You Die? A Simple Guide for Seniors

Older adult reviewing estate and debt documents with financial advisor.

At a glance

  • In most cases, your estate—not your family—pays your debts.
  • Family members can be responsible if they cosigned, held joint accounts, or live in a community property state.
  • Secured debts (like a mortgage or car loan) usually stay with the property.
  • Creditors have a set time to file a claim against your estate.
  • Typical payment order: funeral and administrative costs, taxes, final medical bills, then other debts.

What happens to debt after death

  • Your estate: When you pass away, everything you own and owe becomes your estate. This includes assets (home, bank accounts) and liabilities (loans, credit cards).
  • Probate: Probate is the legal process that settles your debts and distributes remaining assets to your heirs. If there is a will, the court confirms the executor. If not, the court appoints an administrator.
  • Creditor claims: Creditors can file claims against your estate during a limited window set by state law.

Who can be responsible for your debts

  • Cosigners: Anyone who cosigned a loan with you remains fully responsible for that debt.
  • Joint account holders: A surviving spouse or partner on a joint credit card or loan is generally responsible for the balance.
  • Community property states: Debts incurred during marriage may be treated as shared. These states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
  • Secured loans: If someone inherits a home or car with a loan, they usually take over the payments or the lender may claim the property if payments stop.

What creditors can collect, and in what order

  • High priority: Funeral costs, estate administration costs, and federal taxes.
  • Next: Final medical bills and state taxes.
  • Lower priority: Unsecured debts (e.g., credit cards).
  • If there aren’t enough assets: The estate sells property to pay what it can. Remaining unpaid balances are typically written off. Heirs do not pay from their own funds unless they are legally responsible (cosigner, joint account, or community property rules).
Hands organizing bills and financial papers to understand creditor payment order in an estate.
Person holding house keys representing inherited property with mortgage or car loan.

Secured debts and inherited property

  • Example: If you leave a car worth 15,000 with a 7,500 loan, the person who inherits the car is responsible for the remaining loan.
  • Mortgages: A beneficiary who receives a home generally must continue payments or refinance. Federal rules may allow certain relatives to assume the loan without a new credit check.

If a creditor contacts your family

Do this:

  • Share the contact information of the estate’s executor or administrator.
  • Ask for the debt details in writing.
  • Keep records of all communications.

Don’t do this:

  • Do not make promises to pay if you’re not legally responsible.
  • Do not share sensitive information over the phone unless you verify the caller.
Person calmly taking notes during a phone call with a creditor about an estate debt.”

Community property states

  • Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin

Simple steps to protect loved ones now

  • Make or update your will and name an executor.
  • Check and update beneficiaries on life insurance, retirement accounts, and payable-on-death accounts (these often bypass probate).
  • Review how assets are titled; avoid unintended joint debts.
  • Keep a simple list of your accounts, loans, and contact info in a safe place.
  • Consider life insurance to cover final expenses or debts.
  • Talk with an estate planning or elder law attorney about your state’s rules.

FAQs

Do my children inherit my credit card debt?
Generally, no. Unsecured credit card debt is paid from the estate. If the estate cannot cover it, the debt is usually written off unless a child was a cosigner or joint account holder.
What about medical bills?
Final medical expenses are typically paid from the estate and often have higher priority than credit cards.
How long do creditors have to make a claim?
It varies by state and can range from a few months to over a year after notice of death or probate opening.
What if there is no will?
A court appoints an administrator. State law (intestacy) decides who inherits after debts are paid.
Are Social Security survivor benefits protected from creditors?
Social Security payments going to survivors are generally protected, but once deposited, state and federal rules apply. Talk with an attorney for your situation.