When someone dies, the debts the individual leaves behind are not the responsibility of the heirs to pay directly. Debt does not transfer from parent to child. Rather, the parent’s estate is responsible for paying the debts. The estate consists of any assets owned, including real estate, vehicles, savings and checking accounts, retirement funds and investments. These assets may need to be liquidated to pay for the parent's debts unless other methods are in place.
Heirs may wish to contact lenders directly to inform the lender of the death. This is as simple as sending a letter detailing the death of the parent or speaking with a representative over the phone. Most will request a copy of the death certificate.
Locate a Will
Individuals who leave behind wills may have planned how to handle payment of any debts left behind. Locate the will and determine who the executor of the will is. This person will be responsible for paying debts out of the estate's liquid funds. The will is likely to go through probate court as well. In probate, any lenders who have outstanding bills to be paid must present them. A judge may order the executor to pay any outstanding debts verified as accurate. Lenders may have up to one full year to make claims against the estate. During that time, there will be no settling of the estate.
The executor of the will, or an heir of the property, may need to liquidate assets to pay any debts owed. Savings and checking accounts are first, followed by other near liquid, or cash, reserves. In some cases, it is necessary to sell off the deceased's property to pay off the debts owed. The decision of what to sell is up to the executor if there is one. If there is no will and no executor, probate court will appoint one.
Define Any Liability
The only time that someone else may be required to pay a debt of a deceased person is in situations in which there is joint liability. For example, if there is a co-signer on a piece of real estate, the co-signer on the loan may be responsible for repayment of the debt. If there is a remaining spouse, the spouse will be responsible for paying the debts of the deceased spouse unless she can prove no legal liability for that debt in a court of law.