What Happens to Personal Debt After Death?

Debt is an issue for many families across the country. According to data provided by The Federal Reserve, Americans collectively hold nearly $4 trillion in consumer debt. The last thing that any grieving family wants to deal with is a debt collector. Yet, should you pass away, the creditors are still likely to come calling.

This raises an important question: Can your family be held responsible for your debt after you pass away? Here, our top-rated Texas estate planning attorneys provide an overview of what happens to personal debt after death and explain what you can do to protect yourself and your family.

Important Background: Texas is a Community Property State

Under Texas law (Section 3.002 of the Texas Family Code), all property acquired during a marriage is community property — meaning it is owned jointly by both partners. Community property rules also apply to a couple’s financial liabilities (debts). In Texas, a surviving spouse can be held financially responsible for debts incurred by their partner during their marriage. This is true even if the surviving spouse never actually had their name on the account. That being said, a surviving spouse is not automatically liable for their partner’s separate debt.

Secured Debt vs. Unsecured Debt

What will happen to your debt depends on, in part, the type of debt you have. One of the most important factors is whether your debt is ‘secured’ or ‘unsecured’. Secured debt is backed by some type of collateral; whereas unsecured debt is not backed by any underlying asset. Two of the most common examples of secured debt are mortgages and auto loans. With a secured debt, the liability is attached to the asset. In other words, the person taking title to real estate would also become responsible for any remaining mortgage on the property. Likewise, a person taking the title of the car must pay off the auto loan. If they refuse to do so, the lender can foreclose on or repossess the property.

Your Estate Is Responsible for Your Debt

With unsecured or otherwise unsatisfied personal debts, your estate will be responsible. In fact, creditors will almost certainly go after your assets during probate in an attempt to recover as much as possible. Thinking about debt can be stressful. The good news is that with proper estate planning, you can protect your family members from debt and minimize your overall exposure to creditors. There are a number of estate planning tools that can be used to pass down assets — from wills to living trusts. An experienced Texas estate planning attorney can review your individual financial circumstances in order to determine the best options for you and your family.

Speak to a San Antonio Estate Planning Lawyer Today

At Weisinger Law Firm, PLLC, we help our clients find security through estate planning. Our Texas estate planning attorneys have extensive experience handling the full range of issues related to debt. To find out more about what we can do for you, please do not hesitate to contact our legal team today by calling (210) 201-2635. We serve clients in San Antonio and throughout Bexar County.

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