It may seem slightly morbid to think about your own death, and well it is. And sorry there’s no evidence you can cure your debt in the afterlife – despite what the ancient Egyptians thought. Which may be a good thing for you, but bad for your loved ones. So, it is something important to be considered, especially in in light of leaving any debt behind for your loved ones. It is common for creditors attempt debt collection from the deceased’s family, primarily from the spouse. It is important you know the laws and talk to your spouse in order to avoid any problems after you are gone.
Being familiar with the laws pertaining to debt after death can prevent being bullied into paying payments they are not obligated to make and being harassed by bill collectors. When facing the debt from a deceased love one, the first thing to find out is if anyone else’s name is attached to each particular debt.
If your spouse is an account holder along with you, they can be held legally responsible for your debt even if they never used the account. For example, if you had a credit card and your spouse was a co-signer, then the spouse would be held liable for the balance on the card. However, if your spouse is just an authorized user, they are not legally responsible. This does vary from state to state, and there are some states that are considered community property states where your spouse would be responsible regardless if they are a co-signer or authorized user. Community property states include Wisconsin, Washington, Texas, New Mexico, Nevada, Louisiana, Idaho, California, Arizona and Alaska.
A debt collector can legally claim repayment from your estate. For example, if you owe $2,000 in credit card debt and your estate is worth $10,000, the credit card company would claim what was due them and your spouse would receive $8,000. Each state has its own laws, so if this is a concern of yours or have questions about what would happen to your estate after you die, it is best to seek a consultation with an attorney.
If you are concerned about leaving debt behind, there are many ways to learn how to fix bad credit, so you can have the assurance that you will not leave overwhelming debt obligations for your loved ones. The best place to start is by requesting your credit report from three common credit bureaus such as Experian, TransUnion and EquiFax. Look each report over carefully and look for anything that should not be on there, paid balances that are not credited or any errors.
Once you have determined the debt is yours, come up with a plan of action for reducing and eliminating your debt. You may want to look at debt consolidation as an option which would leave you with one monthly payment rather than multiple payments. Pay off old credit card debt or past due medical bills as soon as possible and avoid entering any new debt without a plan for taking care of it if the worse should happen.
Knowing how to fix bad credit and leaving behind a debt free estate is one of the best things you can do with proper financial planning for your family.