Are You Liable for Your Loved One’s Debts?

Losing a loved one is always a painful experience. In many cases, it also comes with logistical and financial challenges — like if your loved one leaves outstanding debt when they die. But are you liable for your loved one’s debts? Here’s a closer look.

In Alabama, you generally aren’t responsible for a deceased loved one’s debts. However, if you cosigned for a debt or otherwise jointly own it, you may be legally responsible for paying it.

Are You Responsible for a Deceased Loved One’s Debts?

Generally, Debts Don’t Pass to Family Members After Death

A common misconception is that a person’s debts disappear after their death. Debts don’t simply evaporate once someone has died, but that also doesn’t mean the deceased person’s family is responsible for paying. After someone’s death, their estate — meaning all money and property left behind after their death — is responsible for their remaining debts.

However, paying a deceased person’s creditors is often more involved than many people realize. During the probate process, creditors may make claims against the estate in an attempt to be repaid. State probate law establishes which creditors have the right to be repaid first.

Even if your deceased loved one has willed you money or property through their estate plan, their outstanding debts must be paid first. If their estate is not sufficient to cover their outstanding debts, any remaining debts they owe will likely go unpaid. In most circumstances, the deceased’s heirs and other family members cannot be held responsible for their debts.

Exceptions: When You Might Be Responsible

Even though you generally aren’t responsible for debts your loved ones leave behind after death, there are limited circumstances where you might be. If your loved one died with a debt they jointly own with you, you will likely be legally responsible for paying. These are some common examples of jointly owned debt:

Joint Credit Card Accounts

It’s not uncommon for family members (and spouses in particular) to have joint credit card accounts. Much like a joint bank account, joint credit card account holders have equal rights to the credit line — and equal responsibility for the debt. If you and your loved one have a joint credit card account and your loved one dies, you will likely be held responsible for the account balance. This is true even if your loved one made most or all of the credit card purchases.

It’s important to note that jointly owning a credit card account is not the same as being an authorized user on someone’s credit card account. If you are an authorized user and the account holder passes away, the account holder’s estate is usually responsible for paying the balance.

Cosigned Debts

When you cosign for someone’s debt, you’re saying that you will pay for that debt if the other cosigner is unable to. There are many different types of debt that can be cosigned:

• Car loans
• Apartment or home leases
• Mortgages
• Personal loans
• Student loans.

If you cosigned a debt for a loved one and that loved one passes away, the lender has the right to try to collect the whole amount of the debt from you.

Concerned about a deceased loved one’s debt? Let the Southern Estate Lawyers team help you. Call us at (251) 444-7000 to request a free consultation today.

Joint Mortgages

Often, family members — especially spouses — will choose to co-own a home. One of the most common ways to do this is to take out a joint mortgage. A joint mortgage (or other joint debt) is not the same as a cosigned mortgage.

With a joint mortgage, both borrowers make payments, and both have an ownership interest in the home. With a cosigned mortgage, the cosigner “guarantees” the mortgage, meaning they agree to take over payments if the primary borrower defaults. Cosigners also do not have an ownership interest in the home.

When Can You Be Held Responsible for a Deceased Spouse’s Debt?

In certain states known as “community property” states, any debts or assets acquired during the marriage are considered to be jointly owned by both spouses. If you are in a community property state and your spouse dies, you could potentially be held responsible for any debt they leave behind — provided that debt was generated during your marriage.

This can pose a problem, especially if your spouse was a compulsive spender or incurred debt without your knowing. Fortunately, Alabama is not a community property state. It’s known as a “common law” state for marital property. In a common law state, if an individual spouse in a marriage acquires property or incurs debt, that property or debt stays with that spouse.

This means that in Alabama, you won’t automatically be held responsible for a deceased spouse’s debt. However, if you took on that debt jointly with your spouse — like if you bought a house together — you likely will be obligated to pay.

What to Do if You’re Being Pursued for a Loved One’s Debt

Unfortunately, the fact that you aren’t legally responsible for a deceased loved one’s debt won’t always deter debt collectors from trying to get you to pay it. If a collector is trying to get you to pay a debt you don’t owe, you should dispute the debt in writing. If the collector continues to try to convince you to pay, it may be worth consulting an attorney. A lawyer can review the debt and tell you whether you’re responsible or not. If you’re not responsible, they may be able to pursue legal action against the collector.

Are You Being Asked to Pay a Debt You Don’t Owe?

The Right Lawyer May Be Able to Help

Losing a loved one is challenging enough. Being hounded by debt collectors or otherwise asked to pay your deceased loved one’s debts while you’re grieving can be overwhelming. The Southern Estate Lawyers team can help you resolve this problem or any other issues with your loved one’s estate.

Whether you’re creating your own estate plan or handling your loved one’s estate, we’re here for you. Call Southern Estate Lawyers today at (251) 444-7000 to set up your consultation.