No one likes to think about their own death or that of a loved one, but taking steps to improve your financial situation today could prevent unnecessary stress for your family during a difficult time.
Family members are not usually responsible for paying someone else's debt, unless they are co-borrowers or signed a guarantee. Dying with debt could also affect someone's estate and how much is left over for their loved ones.
Debts may besecured or unsecured.
When someone dies with debt, their creditors may go to court and obtain orders to repossess the assets to cover the unpaid cost. This includes cash in bank or savings accounts and other assets that can be sold to recoup the costs. When it comes to dividing estates, creditors have priority over beneficiaries.
If a loan or credit card was insured, or the deceased had life insurance, these may also contribute towards paying off their debt. Any debt remaining after this will not usually have to be paid, unless a family member has already agreed to do so.
There are a few scenarios in which someone else can be held accountable for covering a deceased person's debts. These are:
Some lenders recognise the difficulty of these situations and may offer lenience by waving fees or interest, but this should not be expected.
If you're worried about how your debt will affect your family after you're gone, you could take steps to reduce your debt.
If you're struggling to pay multiple debts every month, you could find it more manageable to consolidate your debts into a single monthly payment with a lower interest rate or a suitable term. Use our free loan calculators to find out how long it could take to get out of debt.
Talking to an impartial adviser could give you more ideas about ways to manage your debt. For confidential advice or a no-obligation debt assessment, call Debt Fix today on 1300 332 834.