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Death and Debt

In total, American consumers owe $11.74 trillion in debt (as of 2014), an increase of 3.3% from the year before. $882.6 billion of that debt is credit card balances. $8.14 billion is mortgage loan balances. $1.13 trillion is accounted for by student loan balances (an increase from 8% from 2013). The average U.S. household consumer debt profile has the average credit card debt at $15,611, average mortgage debt at $155,192, and the average student loan debt at $32,264.

For many, the question is no longer, how do I get out of debt, but who will be responsible for paying off my debt after I die? Questions involved death and debt can be stressful. There are many who fear their kids will be held responsible for their debt upon the event of their death.

In short, this is not true. Your children are not responsible for paying your debts after you die. If you fear this very scenario, there is action you can take in order to make sure that creditors have no reason to look to your children for payment in the event of your death.

You may need to make some changes if:

  • You have ever had one of your children cosign for you on any type of credit account (mortgages, loans, personal loans, etc.). Maybe there was a point at which your child had better credit than you or you could have been helping them out by using your good credit to help them make a purchase, but allowing them to take responsibility for the loan by cosigning. If your child’s name is listed as a cosigner on any debt that you feel they aren’t liable for, you should make every attempt to remove it in order to avoid them being held responsible upon your death.
  • You have added any of your children’s names or social security numbers to any of your credit card accounts so that they could have access to the use or billing information of the card. While this does not actually impose any liability on the child or “authorized user,” the creditor may make an attempt to collect from anyone listed on the account. They could even sue in an attempt to collect. If you have your child’s name, social security of personal information on any credit account and you feel death is imminent you need to remove their information as soon as possible. Your children will already be distraught by the loss of their parent, you don’t want to leave them dealing with a financial mess as well. Battling creditors and disputing liability is always a tough situation, but immediately following an emotionally traumatic experience, like the loss of a loved one, many are simply not equipped to handle it. Your children may accept financial responsibility for your debt simply because the creditor/s push it on them at a time when they aren’t willing and able to stand their ground and fight back – they’re too busy mourning.
  • You have a child with the same name. For instance, Mike Williams with a son named Mike Williams, Jr. If you have the same name as your son or daughter, it’s a common problem for information to be inadvertently reported on the wrong credit report. The social security numbers are different, but if the parent’s account appears on the child’s credit report, creditors will often attempt (sometimes aggressively) to collect the parent’s debt/s from the child whose report shows their existence.
  • You have ever “used” your child’s credit without their permission. If this sounds completely unheard of to you, you’re probably in the clear, but, sadly, and heartbreakingly, many parents with bad credit will find themselves desperately turning to their child’s “good credit” to get loans. In many cases, the parent opened the credit account or loan when the child was still a minor and they have no idea it exists. While the child can usually prove that they never opened the account, it could cause a lot of trouble for them before all is settled. What makes this situation even worse is that the child usually doesn’t learn about the account until it’s delinquent and creditors are calling or even suing for non-payment.

If you need help figuring out how to protect your children from being held responsible for your debt after you pass, please get in touch so the expert bankruptcy attorneys at Westgate Law can answer your questions.

About the Author

Justin Harelik

Justin has a singular goal: to get people out of financial distress and move them to financial stability and prosperity. He does this by combining 15 years of in-depth experience in bankruptcy, credit management, debt negotiation and student loan modifications, and he does it with both English and Spanish-speaking clients.

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