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Information on debt inheritance

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Mark Cappel
UpdatedJul 11, 2024

My Mother will be 75 soon, what will the credit company will do if she passes away before paying the debt?

Hello Bill, My mother will be 75 in November, she owes 15,000 dollars on a credit card and owns a condo worth about 40,000. She's wondering what the credit company will do if she passes away before paying the debt. Thank you for your time and any advice.

A common question asked concerning debt is what happens when you pass away. Many individuals assume that when they die their debt is forgiven or possibly written off by the lending institution, but it does not work that way. The reality is that if you pass away while still in debt, your surviving family members, or heirs to the property may be held liable for the money that you still owe. Typically, a will controls financial affairs after a person's death. A will distributes assets, not debts. However, before any assets can be distributed to the heirs, all the debts must be paid. Therefore, assets are sold to pay for any debts that remain. Only after the debts are paid will the remaining assets be distributed among the beneficiaries of the will.

Inheritance laws vary by state. If the state you live in (or the deceased lived in) invokes "community family property" laws or "joint and several" provisions, heirs to an estate may be deemed responsible for the debts of a deceased person. The rationale is that anyone staking claim to the assets of an estate, should also be willing to accept its liabilities. A few states are beginning to place limitations on the amount of estate money or property a creditor can claim. Most creditors will still try get what is owed to them. The only way that debt can be forgotten after death is if there is no money, property, or other assets left behind. If money cannot be collected from an estate then creditors will likely not go after surviving family members.

One way to pay off the credit cards is to go in for a secured debt consolidation loan. This type of loan is essentially a home equity loan which is used to pay off your other creditors. Secured consolidation loans help many consumers by consolidating all of their debts into a single monthly payment with a lower interest rate and payment amount. The big considerations for getting 'approved' for a refinance loan (typically called a mortgage refinance) are Loan to Value (typically rule of thumb is that 80% is reasonable), debt to Income (typically anything above 50% is very high, and anything below about 30% is good) and lastly credit rating (a FICO score is an indication of your credit worthiness and ranges from 300 on the low end to 850 at the top).

If you want to see if this loan can be done, makes it easy to compare mortgage offers and different loan types. Please visit the loan page and find a loan that meets your needs at: Free Mortgage Refinance.

Your mother may also want to consider the services offered by debt settlement firms. Rather than making monthly payments to the creditors, these programs negotiate lump sum settlements with the creditors, frequently reducing the debts by 50% to 60% of the principal balances. These programs usually take only 2-3 years to complete, so this is a good option for many people to rid themselves of debt in a relatively speedy manner. In many cases they can also reduce your monthly payment toward your debt. There is one major drawback to debt settlement programs, though, they will significantly damage your credit while in the program and for at least a year or two afterward. However, the hit to the credit may be well worth the benefit of ridding oneself of credit card debt. A debt settlement program is probably the fastest way to resolve you debts.

If your mother's health deteriorates, try and work to pay off any debt that is owed. She may prefer to leave her assets to you or other family members in an inheritance, but it is also important to remember that many creditors will get their money one way or another. Using savings or property to pay off debt will prevent your family from having to go through difficult meetings with lawyers and creditors.

Hopefully, one of the options I have described above may be able to help you. I encourage you to explore the Debt Help page to read more about these and other options available to you.

I hope this information helps you Find. Learn. Save.

Good Luck,


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Struggling with debt?

If you are struggling with debt, you are not alone. According to the NY Federal Reserve total household debt as of Quarter Q1 2024 was $17.69 trillion. Student loan debt was $1.60 trillion and credit card debt was $1.12 trillion.

According to data gathered by from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

Each state has its rate of delinquency and share of debts in collections. For example, in New York credit card delinquency rate was 3%, and the median credit card debt was $420.

Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.



MMike, May, 2013
I live in New York. My dad passed away in September. I live in a condo which my sister and I paid $30,000 on to pay off the mortgage. I have gotten a few notices about debt collection from credit card companies the most recent and highest amount was $4,000. Since the condo has shares and is still in my dads name what can they do to collect??? My thought is that the debt is nowhere near the value of the condo so they couldnt come after it. I've also heard things about a condo having shares means its not viewed quite as a house. Please help.
BBill, May, 2013
Consult with a lawyer in the state where your father resided who has probate experience to learn the proper procedures for handling claims on your father's estate. Do not ignore this issue.
mmarcy, May, 2011
I live in California and have really bad credit, a little below a 600 score. I am recieving notices from creditors withsettlement offers which is good. I am going to be inheriting some property that has to be liquidated, and am worried that these creditors will put a lean on my portion, before I can get the money myself and pay the settlement offers. Will these creditors put leans on my portion of the inheridance, and if so, will they take the entire amount or the settlement offers? Thanks!
BBill, May, 2011
A judgment-creditor can ask for an account levy (called an account garnishment in some jurisdictions), wage garnishment, or a lien on the judgment-debtor's real or personal property. A creditor without a judgment (in other words, a creditor who has not filed a successful lawsuit) may not levy an account, ask for a wage garnishment, or place a lien on property.

You mentioned you reside in California. Consult with a California lawyer who has consumer law experience to learn more about your rights. See also the resource California Collection Laws to learn about your rights and liabilities.
oom, Feb, 2011
All legal debts/loan etc are made as per Indian contract act 1872 and this law (or any other banking law) does not talk about relationships (father, mother or legal heir). Hence, a father's debt cannot be legally impose on his heirs when heirs are not a part of the contract. I myself has fought a case against SBI bank. The bank has debited money from my sisters account on the ground that her dead husband had loan and she is liable to clear the loan as legal heir. I won the case with 6 lakh as compensation. The judges simply asked the bank that whether she was a part of the loan agreement and if not, the legal heir is not responsible to repay the loan. If A and B enter into contract and B dies. The contract becomes void as law cannot be imposed on the dead person (Indian contract act 1872. Further, the contract becomes void for the third person C if C is not a part of the agreement. Hence, legal heirs are no way liable to pay father's debt if they have not legally entered into the agreement.
BBill, Dec, 2008
I am not a tax attorney, so I cannot recommend a way out. It is best that you consult with a tax attorney, who will be able to advise you on the best course of action after looking at all your financial information.
JJan, Dec, 2008
Thanks for your answer but is there anything I can do to reject the potential inheritage? Jan
bbill, Dec, 2008
When your father passes away, his assets and debts will be transfered to his estate. The estate will then decide who gets what. If there are any debts left over, they will be passed on to the legal heir to the estate. Now if your father has assigned you as the legal heir to his estate, then you cannot absolve yourself from this debt, apart from assigning someone else as the legal heir.
JJan, Dec, 2008
My father is a US citizen and leaves in US most probably in NY or New Jersey. I've just learned that he has debt toward US tax office and potentially other debts. According to the law of my country, when he passes away, the respective US inheritance law will apply. Will I be responsible for his debts? Is there something I can do to reject the potential interitage? regards Jan
BBill, Oct, 2008
The debt will probably go into probate court and will be the responsibility of the legal heir. If the probate court decides that there are no assets to go after then that probably will be the end of it. I would suggest that you get a proper legal opinion on this issue.