Do Debts Die with the Person?
There’s a rumor that “debts die” with the person. Meaning, when someone dies, all their debt disappears. In California, this isn’t true in most cases. Debts do not automatically disappear when a person dies. However, how they are handled depends on the type of debt and the deceased person’s estate.
Here's a general breakdown:
Debts Paid by the Estate: When someone dies, their estate (the assets they left behind) is used to pay off any outstanding debts. This includes mortgages, credit card balances, medical bills, etc. The debts are paid before the assets are distributed to heirs. If the estate does not have enough assets to cover the debts, the debts typically go unpaid, and creditors may write them off. (Note: This does not mean that an heir can just keep the house and decide not to pay the debt. It means that the house will need to be liquidated to pay the debts before the heir receives the house.)
Spouses and Joint Debt: In California, which is a community property state, if the deceased person had a spouse, any joint debts or debts acquired during the marriage may be the responsibility of the surviving spouse. However, debts that are solely in the deceased person's name (if it can be proved that it was individual debt and not community debt) are typically paid from the estate, not the surviving spouse’s personal assets. This can be very difficult to prove, however.
Cosigned Debt: If someone cosigned a loan or credit card with the deceased person, they may still be liable for the debt after the death. The creditor can seek repayment from the cosigner.
Creditors: Creditors have a specific amount of time to file claims against the estate. If they do not file in that period, they may lose their chance to collect the debt.
So, the debts don’t disappear. They must get paid, but they get paid from what was owned by the person who died — except for community property issues which may require a surviving spouse to pay off the debt.
If you are dealing with an estate after someone dies, please contact me to discuss the best way to handle this.