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When do a deceased person’s debts have to be repaid?

On Behalf of | Dec 21, 2022 | Probate

No one wants to die and leave their loved ones to deal with their debts. However, when someone dies unexpectedly or is unable to repay their debts before they pass away, that happens.

There may be a number of debts those administering an estate may have to deal with. Not all are required to be paid out of the estate’s assets, but some are. These debts need to be paid before any inheritances can be distributed. Let’s take a look at what happens to some common debts after a person dies.

Taxes and unsecured debt

These include back taxes (like property and income taxes) as well as taxes owed for the year the person passed away. Federal taxes must be paid before any other debts.

The estate is also generally responsible for individual unsecured debts such as personal loans and credit cards. If someone made a loan to the deceased that wasn’t fully paid, they can make a claim with the estate for what they’re owed – although they may not get the full amount.

Note that if they’re joint debts, the other person will become fully responsible. Since Ohio isn’t a community property state, surviving spouses are usually not responsible for these debts if they weren’t joint loans or credit cards.

Student loans

Whether student loan debt has to be repaid depends on whether it’s a federal government loan or a private loan. Typically, federal loan debt is discharged when a person dies. Private loan policies vary by lender.

Secured loans

These include things like a mortgage or an auto loan. If no one inherits these assets and continues paying the loan, they will likely be repossessed (foreclosed on, in the case of a home). If a person dies with a mortgage, it’s crucial to determine as soon as possible what’s going to happen to the home if they didn’t leave it to anyone specifically or if that person declines the inheritance.

Generally, creditors can’t come after family members directly to repay a debt. If someone tries to tell you that you’re responsible for a debt, don’t pay it until you’ve confirmed that you’re legally responsible. If a loved one has died with debts, it’s wise to have experienced legal guidance before you start dealing with them.