What happens to debt when a person dies
Some Florida residents who are struggling with debt might wonder what would happen if they died while still owing money. This is the case for most people. On average, according to the credit bureau Experian, the average debt without including home mortgages is $12,875. Including mortgage debt, the average is $61,544. While debt generally does not pass to a person’s heirs, there are other ways in which the debt can affect them.
Debt belongs to an estate. If the estate is not worth enough to pay off the debt, the creditors simply go unpaid. However, if a home is in the name of the deceased person and other family members live in the home, they could lose that home. Joint accounts might also be vulnerable.
One thing people may want to consider is what types of debts they have and whether they will still be payable after their death. For example, federal student loans will be cancelled when a person dies, but private loans might not be. People may also purchase life insurance to help cover any debts they leave behind.
People who are concerned about debt and its effect on their financial security and that of their family might want to talk to an lawyer. Bankruptcy may be one of several options for debt relief. Individuals may have many misconceptions about bankruptcy. For example, they might have heard that they lose all their assets in a bankruptcy or that bankruptcy will ruin their credit permanently. However, they may be eligible to file for Chapter 13 bankruptcy. This allows them to work out a payment plan over a period of a few years to keep some of those assets. Furthermore, it is also possible to rebuild credit after a bankruptcy.