Question about debt and deceased.

[eliza61]

What happens to your debt if you die without any assets? coworker (I did not know him well) passed away last month and evidently had a lot of debt. He is divorced with 3 adult kids. He did have a will specifically leaving his house to his kids. Anyone know if the kids have to sell the house to pay off his debts?

 

[seashoreCM]

With the house in an ordinary will, it will have to be sold to pay the debts.

If the house was in his name then that house was an asset of his.

There are some exceptions notably dealing with certain kinds of trusts.

There is also something called a life estate. If a child was given a life estate, the parent's creditors would be able to seize the house but would not be able to evict that child.

 

[Jeff_G]

We are going through this with my Father in law...

Basically when you die, your assets (the house, money, and all other property) stand good for your debts. So if he had more debt than assets, then yes the house and all other assets will likely be sold to cover the debt.

The estate will need to be probated especially if there is real estate involved. Who gets what varies state by state, sometimes the funeral and legal costs are paid first, secured creditors (the mortgage company, a car loan) will get to recover their security and all others get what is left. If you assets are worth more than your debt, you are solvent, if not you are insolvent. Of course they will want to get legal advice on this situation…

Also you do not inherit debt, so the children do not personally owe any debt unless they co signed on anything. This however doesn’t stop the creditors from trying to get you to pay…

Again they should seek legal advice from a good probate lawyer…