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Practically everyone accumulates debts throughout their lives. These can be in the form of a mortgage, a car loan, credit card bills or a student loan. And many struggle to pay off these loans as much as they can, but sometimes the staggering amount can just be too much and some people eventually pass away before their loans get paid off.

In these situations, heirs and loved ones close to the deceased can suddenly find themselves with added debts on their laps. They not only have to pay off their own debts, they have to pay off the debts of their departed loved ones as well. If this happens to you, what should you do?

When Do You Inherit Debt?

Before you begin to fret and prepare to take on your nanna’s credit card debt, examine your situation for a moment. Not all debts can actually be inherited. Creditors may bully you into paying up and making you think that it is your ‘moral obligation’ to pay off your parents’ debt, but legally, there are only certain instances when debt can be inherited.

In the case where your parents, grandparents or guardians accumulate debt, you cannot inherit this unless you are a co-signer, guarantor or have a stake in the debt. Your mother’s credit card debt for instance, cannot be handed over to you unless you are a cardholder of the same account. Unless a debt is in your name, whether it is a credit card or checking account, you cannot inherit the debt. Some types of debt, such as federal student loans, are also forgiven the moment the debtor dies or is disabled, so you have nothing to worry about regarding these.

However, if you make efforts to pay off their debt using your own account even while your parents are still alive, creditors will get the impression that you are taking responsibility for their debt. So once your parents pass away, creditors will most likely come after you and hold you responsible for your parent’s outstanding debt.

For spouses, it can be a slightly different story. In some areas, any debt or account established after marriage can be considered jointly owned. This means that in case of separation without divorce or the death of one spouse, the spouse/s present must take responsibility for paying off the debt, even if their other half was the one who created it.

I’ve Inherited It, Now What?

In most cases, the debt of the departed is usually paid off with their remaining assets. These may include the profits made from selling the person’s real estate, vehicles and other valuables. If however, the debt is clearly in your hands now, there are a few things you can do to lessen the burden:

To avoid inheriting debt altogether, it’s best to nip it in the bud. If it seems like your parent or spouse is accumulating a lot of debt, discuss it with them so you can find effective and less burdensome solutions while you still can. Help them not to incur any more debt, and keep in touch with co-signers or guarantors to remind them of their responsibility.

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