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Can You Inherit Debt?


For many family members, the stress of dealing with debt left behind can sometimes eclipse their grief for the loss of their loved one. Typically, the deceased person’s estate assets satisfy the claims of any creditors before they are distributed to beneficiaries, sometimes leaving survivors nothing to inherit. Even if the deceased’s assets do not adequately pay off remaining debts, the rest gets written off as a loss. However, there are some cases in which the debt of a loved one may be inherited. These cases include co-signed debts, guaranteed debts, and community property. If you co-signed on a loan or credit card with the deceased, you are responsible for that debt even if you did not directly incur it, as is similarly the case with guaranteed debts. For community property, a spouse may be held responsible for debts even if he or she was not a co-signer or applicant. In a state like California, for example, which is a community property state, all property and debt is jointly owned. Thus, if your spouse should pass away, you inherit the debts.

Student loans are somewhat of a different matter. Federal loans often offer loan forgiveness if the borrower dies, or even becomes disabled, prior to paying it off, but private banks often continue to force co-signers to pay off the remaining balance. Unfortunately, this burden usually falls upon grieving parents. Some private lenders may decide to close the books on a borrower’s debt out of compassion, but this varies by lender. In cases of medical debt that a parent may incur, the state may attempt to recover the payments. While rarely enforced, many filial responsibility states, including California, may require adult children to pay for a deceased parent’s medical debt.

At Wadhwani & Shanfeld, we are committed to fighting for our client’s best interests when they encounter difficult financial situations, such as inherited debt and work hard to determine the best solution.

To schedule a free consultation, call us at (800) 996-9932

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