Debt of the Dead

Written by True Tamplin, BSc, CEPF® | Reviewed by Editorial Team

Updated on January 05, 2023

Debt can come in many forms. There are loans taken out for college education, mortgages on a home, car loans, and credit card debt.

The list goes on and on. If you inherit any of these debts, it is important to know whether or not you are required to pay them off.

What Is Debt?

Debt is a legal obligation that one person owes to another.

In the case of a loan, you borrow money from a lender and agree to repay it according to a set schedule with interest. The lender holds onto the debt until the balance is paid in full.  Some debts can change hands many times.

For example, credit card debt may be bought and sold between companies several times during the repayment process. However, if you inherit a debt, you do not automatically become responsible for it, but there are some exceptions to this rule.

Sometimes On Behalf of a Spouse. When you are responsible for paying off your spouse's bills, this is known as "co-signing" the debt. This occurs when they have bad credit or have not established their own credit yet. 

If your spouse dies, you are still responsible for this debt even though it is technically not yours until the balance is repaid.

On Behalf of a Relative. If you are obligated to pay off another relative's debt, this is referred to as a "co-debtor." 

For instance, if your sister dies with credit card bills that she alone was responsible for, but you also shared an account with her that has unpaid balances, the creditor may come after you for the balance of both accounts.

The Difference Between Co-signing and Being a Co-debtor

Co-signing is when you willfully sign on to be responsible for someone else's debt, such as your spouse or child. 

This is done by contacting the lender and agreeing to repay any outstanding balances in exchange for allowing this person to open an account.

You are a co-signer because you have agreed to take responsibility for the debt, but it is not yours until it is fully repaid.

On the other hand, being a co-debtor means that you have some connection to the deceased individual and share some aspect of their debt. 

For example, if you are married to someone with credit card debt before your marriage, they may have put an account under both of your names.

If this person passes away, the creditor could come after you for repayment since it is in your name or go after their estate. 

You will most likely be dealing with a co-debtor debt in the case of a spouse because you are already jointly responsible for repayment.

What To Do If You Inherit Debt?

Once you have determined that you are being faced with an inherited debt, it is time to decide if you will pay the balance or not. 

When considering this option, there are several things to consider, such as your ability to make payments if any assets can be used to pay off the debt and how repaying this debt will affect your other finances. 

If you have a legal obligation to repay the debt, you must try to find a way to do so if possible or face serious consequences for not paying it back.

Legal Requirements

When you are responsible for paying off another person's debt legally, it is essential to know your options. 

The first thing you need to do is determine the status of the account. You can contact the creditor by phone or mail and request information about whether or not the estate must be probated before repayment plans will be made.

  If no estate exists, you will most likely have to come up with the balance on the account. If the estate is being probated, you can request to be notified when completed so that repayment arrangements can begin. 

A probate court will assign a trustee to oversee this process, and they are responsible for determining if any assets exist or where they are located. If the estate is insolvent, it has more debt than assets, so there may be no money available to repay creditors. 

In this case, you will need to pay off the balance yourself, but you cannot do so until after probate has been completed and a trustee assigned.

Avoiding Inherited Debt

If you are looking for ways to avoid inheriting debt, you must avoid co-signing or becoming a co-debtor on another individual's account. 

If you are already responsible for paying off an existing debt for someone else, make sure to monitor the status of the account closely and contact the creditor immediately if there is any indication that the person who owes you money is deceased.

By following these simple steps, you can avoid inheriting debt in most cases, but it becomes your responsibility when you have agreed to pay another's debts before they pass away.  If there is any question about whether or not someone may be deceased, contact their creditors directly for information.

Avoid taking on new debt yourself and monitor your own financial status to make sure you can pay off anything that might come due.

If you receive a phone call from a creditor asking for repayment of an inherited debt or more information about who may be responsible, request written notification in the mail instead.

This will allow you some time to check into the matter before coming to a final payment decision.


Debt of the Dead FAQs

If my spouse passes away and we have credit card debt, can I just ignore it?

No. If your spouse left you with credit card debt, you would be responsible for repaying it even if they are unwilling or unable to do so themselves. You could face legal consequences for not paying the balance if you choose to ignore this obligation.

Do I have to pay my deceased daughter's credit card debt?

Suppose your daughter passed away and you received notification that you are responsible for paying the balance on one of her accounts. In that case, you will need to determine if it is a co-debtor account or just an individual account. If it is an individual account, you do not have any legal obligation, but you may decide to pay it off yourself if it is a small amount or if your daughter was financially dependent on you. If it is a co-debtor account, the creditor can pursue payment from either party for the amount owed.

What if I am not able to afford the payments on my deceased husband's account?

If you are having trouble affording payments for your deceased husband's credit card account, you should contact the creditor immediately. Explain that your husband can no longer make any financial decisions and that you want to pay off his obligations but need some time to do so. There is a good chance the creditor will make an arrangement with you to pay back the balance owed in small monthly increments over time.

Are there any ways to avoid inheriting debt when someone passes away?

Yes. Make sure that if you co-sign on another person's account, they are financially responsible and can make the payments on their own. If you cannot pay off an account yourself, make sure that the person who died is not responsible for any other accounts you could be held liable for. If your spouse does not have a will, it could end up as part of their estate, which means someone may need to pay the debt back if they receive anything from the distribution.

We are being sued by an inherited debt collection agency, what should we do?

If an inherited debt collection agency is suing you, your best option is to contact them directly and attempt to negotiate repayment terms. If they do not agree to make any changes, you can request information about the deceased person's estate to find out what legal steps must be taken before payment or settlement options can be explored.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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