When you take out a loan, you usually intend to pay it off. However, life does not always turn out as planned, and some people die before they have paid off their debts. That can happen with personal loans, car loans, credit cards and more.

What happens to these debts when you die?

Generally, your estate becomes responsible for your debts. After you die, creditors will be able to claim against your estate once things such as funeral expenses, administration costs and taxes have been paid.

What happens if your estate cannot cover your debts?

In this case, that is usually the end of it. While creditors may try to hassle your family for the debts you owed, they generally have no legal right to do so. Your family may need to hire an attorney to get the creditors to cease bothering them.

What happens if the debts were co-owned?

If your spouse survived you, they may or may not remain responsible for paying off those debts after your death. That sort of situation would be standard on a mortgage, giving your spouse the option to continue making payments or sell the property to pay it off. Your spouse may not be liable, however, for debts that only belong to you, like a credit card that’s only in your name.

Is there any way of protecting your assets from creditors?

Various estate planning tools can protect your assets from creditors. These include certain types of trusts, life insurance policies and retirement accounts.

When things are going well, it’s easy to assume that you will finish paying off your debts. Yet it only takes one accident at work, one car crash or one heart attack to change that. To avoid the chance that you leave your family burdened by your debts, seek the advice of an estate planning attorney.

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