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Repaying debt after the debtor dies

On Behalf of | May 1, 2020 | Estate Planning |

It is possible for a person to pass away prior to paying off a credit card or private student loan balance. If Florida residents owed money to creditors when they die, those creditors may file a claim with the decedent’s estate. Surviving family members aren’t responsible for the debt themselves unless they cosigned on a loan or made another type of guarantee to a creditor.

It is possible to ask that a joint debt be partially or wholly forgiven by a lender after a loved one dies. However, it is unlikely that such a request will be honored. Whether a creditor gets paid depends on how much money an estate has to pay down existing debts. It may also depend on what type of debt a person owes. Typically, funeral and estate administration expenses are paid first. After those costs are accounted for, an estate will generally be required to pay income or other tax bills.

In some cases, hospitals and other medical providers would be next in line to receive what they are owed. It is important to note that some assets pass directly to beneficiaries when a person dies. Those assets include life insurance death benefits or other assets that have beneficiary designations attached to them.

Assets that remain in a person’s estate may be subject to probate. An attorney may help an individual start the probate process or answer questions that he or she has about it. Legal representatives may help resolve any legal challenges that are made by family members or other interested parties to a will, trust or other document.