What Happens to Your Debt When You Die?

It can be distressing and scary to think about what happens to your debt when you die. You may be wondering what may happen to your debt when the time comes.

When a person dies, their debts are typically repaid to their creditors out of the money and sale of property they leave behind, which is called the estate.¹ If the value of the estate can’t cover the remaining balances, some debts may be forgiven. However, if a debt isn't forgiven, another person may be responsible for repaying it in a few situations:

• If they cosigned the debt
• If they were married to the person who died and live in a community property state
• If they were legally responsible for settling the estate.²

Ultimately, factors like where you live, the type of debt you have and your financial circumstances determine what happens to your debt when you die. Understanding how debt is resolved after death may help you and your loved ones prepare for whatever the future holds.

What happens if you die with debt?

Your estate may have to cover several expenses in addition to your debt. State law generally determines the order in which expenses may be paid by your estate. Even if the estate has enough assets to cover your balances, there may not be enough money left after the other expenses have been paid.³ In that case, what happens to the remaining amount often depends on the type of debt and whether any other party could be responsible.

Keep in mind that rules vary from state to state, and every situation is different. It’s a good idea to check your local laws and consult an estate planning attorney for guidance specific to your circumstances.

How is debt managed after death?

Normally, an estate plan will determine who manages your debt and other financial processes after your death. Setting up an estate plan may include writing a will and choosing an executor, or someone legally appointed to manage and settle your estate after death. The executor handles logistics like paying off debts, managing assets and distributing inheritances.

If a person passes away without a valid will, the estate goes through probate, a legal process where the court oversees how assets are divided. The estate is then distributed according to the state's probate laws, so the outcome depends on where you live. Some assets, like insurance policies and bank accounts with named beneficiaries, may bypass this process entirely.⁴

Can debts be forgiven after death?

If your estate can’t cover your debts in full, or you don’t have any assets, many remaining debts may be forgiven when you die. Under most circumstances, family members aren’t legally responsible for a deceased relative’s debt and aren’t expected to repay it out of pocket. However, if any of those debts are shared by another person, the surviving borrower may become responsible for repaying them.⁵

Who is responsible for your debt after you pass away?

In some cases, someone else may become responsible for paying off your debt after you die.

These people may be responsible for a portion of your debt:⁶

• Joint account holders: If you open up a joint account with someone else, the surviving account holder will still have to repay any of the debts tied to it.
• Cosigners: If someone cosigns a loan for you, they’ll still be liable for the debt.
• Estate executors: If the executors of your estate make mistakes while managing your assets or don’t repay the estate debts, they may have to repay those debts themselves.
• Spouses: If you live in a community property state, your spouse may have to put joint assets toward your debts after death. Community property states require spouses to evenly split assets and debts they acquire after getting married evenly.⁷

The nine community property states are:

• Arizona
• California
• Idaho
• Louisiana
• Nevada
• New Mexico
• Texas
• Washington
• Wisconsin

It’s against federal law for creditors to ask anyone to cover your debts after your death unless they’re legally liable for it. Even if they are responsible for the debt, your loved ones have the right to tell abusive debt collectors to stop contacting them.⁸

What happens to different types of debt when you die?

Understanding the types of debt you have may help you and your loved ones know how to manage that debt in the future.

Secured debt

Secured debt is backed by collateral, which is something valuable you own, like a house or car. Some common examples of secured debt include personal loans, mortgages, auto loans and home equity lines of credit (HELOCs). If a secured debt can’t be repaid by your estate, the lender could take your collateral to recover the amount they’ve lost, just like they could if you stopped making payments during your lifetime.

Unless they’re joint holders of the account, your loved ones probably won’t have to cover unpaid secured debts after you die, but they won’t be able to retain or inherit the collateral if the bank repossesses it.⁹

Unsecured debt

Unsecured debt doesn’t involve collateral. Most credit card debt, many personal loans, student loans and medical bills are types of unsecured debt. If you pass away with unsecured debt, resolving those debts is left to the executor of your estate. The executor may sell your assets to pay those debts.

If there isn’t enough money in your estate to cover the unsecured debt, it remains unpaid unless someone else, like a cosigner or a spouse in a community property estate, is legally liable for it.

What Happens to Different Types of Debt After You Die?

Type of debt	Example	Who is responsible?
Secured debt	Mortgages, HELOCs, auto loans, some personal loans	A cosigner, co-borrower or the person(s) who inherit the asset being financed may be responsible. Otherwise, the estate becomes responsible.
Unsecured debt	Many personal loans, student loans, medical bills, credit cards	A cosigner or co-borrower may be responsible. Otherwise, the estate becomes responsible.

How are creditors notified of your death?

A friend, family member or the executor of your estate should tell your creditors that you’ve passed away as soon as they can. They’ll need to send each creditor a copy of your death certificate. Typically, creditors will put a hold on debt collection activities while an estate is in the process of being settled.

Once they’re informed, the creditors will also notify the three major credit bureaus (Experian, TransUnion, and Equifax) that you passed away. Your loved ones or estate executor may want to send copies of your death certificate directly to the credit bureaus and ask for copies of your credit reports. That way, they’ll have a list of all your creditors in one place, which can simplify the process of closing out your estate.⁹

Ways to pay down debt

If you’re worried about your debt reducing the value of your estate or becoming a hassle for your loved ones, consider taking steps to bring down your debt today. Many methods could help you reduce balances or even eliminate your debt altogether, including:

Debt snowball

With the debt snowball method, you work to pay the smallest debt balance off first. Once that debt is paid off, you apply that payment to the next smallest balance, creating a “snowball” as you quickly pay off more debts. You must still make minimum payments on any other debt balances.

Debt avalanche

With the debt avalanche method, you focus on paying off your highest-interest debts first. Instead of reducing the number of debts you have, you focus on reducing the amount of interest you owe. Once you pay off your debt with the highest interest rate, you repay the debt with the next-highest rate and continue until you’re debt-free. As with the debt snowball method, you must still make minimum payments on all your other debts.

Debt consolidation

Debt consolidation combines multiple debts into one, easy-to-manage payment using a debt consolidation loan or a credit card with a balance transfer offer. Combining debts into one loan means you only have one fixed monthly payment to keep track of. Debt consolidation may also lower your monthly payments or help you repay your debt faster, if you qualify for a lower interest rate.

Debt management plan

Debt management plans (DMPs) typically involve arranging for a credit counselor to negotiate with your creditors to try to secure lower rates and payments. Every month, you make one payment directly to the credit counseling agency, which pays your creditors on your behalf.

If you’re interested in arranging a DMP, look for nonprofit agencies certified by the National Foundation for Credit Counseling (NFCC) or the Financial Counseling Association of America (FCAA). The U.S. Trustee Program of the U.S. Department of Justice has also compiled a list of approved organizations that could help your search if a DMP seems like a good fit.

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Protecting loved ones after you’re gone

Death and finances are both often uncomfortable topics to discuss, especially with the people you love. However, by taking the time to have difficult conversations with loved ones about what happens to your debt after you pass away, you may help them avoid unnecessary financial stress during a painful time.

If you have any questions about managing debt after the loss of a loved one or planning your estate, call a qualified attorney or financial advisor in your state for specific advice. When you’ve faced the tough topics head-on, you may feel more secure that your family is taken care of, even after you’ve passed on.

This article has been updated from a previous posting on Jan 29, 2025. Skyelar Kavanagh contributed.

Sources

1 https://www.investopedia.com/terms/e/estate.asp
2, 5 https://consumer.ftc.gov/articles/debts-and-deceased-relatives
3 https://legalclarity.org/who-gets-paid-first-from-an-estate/
4 https://www.investopedia.com/terms/p/probate.asp
6 https://www.consumerfinance.gov/ask-cfpb/does-a-persons-debt-go-away-when-they-die-en-1463/
7 https://legalclarity.org/what-is-a-community-property-state-and-how-does-it-work/
8 https://www.consumerfinance.gov/ask-cfpb/does-a-persons-debt-go-away-when-they-die-en-1463/
9 https://www.bankrate.com/mortgages/what-happens-to-your-mortgage-when-you-die/
10 https://legalclarity.org/how-to-notify-creditors-of-death-steps-and-deadlines/

This article is for general education and informational purposes, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any purpose and is not intended to be and does not constitute financial, legal, tax, or any other advice. Parties (other than sponsored partners of OneMain Financial (OMF)) referenced in the article are not sponsors of, do not endorse, and are not otherwise affiliated with OMF.