We’ve all heard that only two things are guaranteed in life; Death and Taxes. Well, maybe we can add Debt to that list; Debt, Death, and Taxes or DDT for short? “DDT – is it really that bad,” you ask. This can.
Did you know that most people who move to better places leave debt? That’s right. What is the old saying; “You can’t take it!” That makes sense, right? You cannot take your assets, and thus, you cannot take your debts. So what happened to all the debt left on this Earth? Well, that turned out to be a very interesting topic. So, let’s talk about this, shall we?
How Often Do People Die With Huge Debt?
Nearly 75% of Americans who die today are left in debt. The average amount owed, excluding home loans, is nearly $13,000. If we included the mortgage, the debt owed would be about $61,500. Nearly 70% of Americans who died in 2018 had credit card debt. Car loans owe 25% of those who die. It turns out that 6% owe money on student loans, an amount that is increasing every year according to Experian and credit.com.
Do these statistics surprise you? They shouldn’t. The average person has virtually no savings, a car loan, and a credit card debt of about $10,000. Most people don’t even own their smartphone right away instead of paying monthly on top of their cellular service bill. If this is you, you are the majority, and are still considered middle class. You shouldn’t be surprised when a loved one passes by and you find out that they are in the same boat as you now.
Who Is Responsible For All This Debt When Someone Dies?
Do not worry the heirs are not usually the ones who are now in debt. The property of the deceased is now responsible for the debt. However, this can greatly affect your inheritance as creditors are paid first. There are rules for settling an inheritance, and rules that determine how much must be paid for the debt against that inheritance. Much of this depends on the country the deceased claimed as their place of residence, the total value of the estate, and the type of outstanding debt.
If a person dies of more than his property, the heirs can ‘refuse to accept’ their inheritance, and as such, they will receive neither money, nor be liable for any debts. On the other hand, if a person dies and they have more assets than liabilities, then perhaps some of those assets need to be sold to pay off the debt. In this case, the heirs will get the difference (less administrative costs for executing the inheritance and taxes owed).
Needless to say, it makes sense to have a will and a plan before you die. Of course, this doesn’t always go well, as no one really knows when or in most cases how they will die.
What If Your Spouse Dies – Are You In Debt?
Well, in the case of the surviving spouse, it becomes a completely different situation. Again, it doesn’t matter where you live, for example, ‘public property’ status. In such a case, you can be held liable for the debt even if it is only in your spouse’s name, and ‘if’ the debt was incurred during the marriage.
Often creditors will lean a little harder on the surviving family members to try to get paid. Creditors may also hire collection agencies to try to collect debts. This can be a problem when you are already in an emotional state, because they are trying to get you to commit to paying off debt, even if you are not responsible.
If you’re feeling pressured to pay off a debt you don’t think you owe, you need to seek the help of a lawyer who knows the law and helps explain to you your rights. There are law firms out there to help.