When your parent passes away, one of the primary questions you may have is whether you will be responsible for your parent's debt. Your mother or father may have had substantial credit card debt, a mortgage, or car loan. The short answer to the question is no, you will not be personally responsible for the debt, but failure to pay such a debt can affect the use and control of secured assets like real estate and vehicles.
Responsibility for Parent's Credit Card Debt
If your mom or dad passed away with credit card debt the good news is that you are not personally responsible for their debt. After all, you never signed an agreement to be liable for paying their credit card bill. The responsibility was on your parent.
What Credit Card Companies Will Do to Collect a Debt
Credit card companies typically will send demand letters and make several calls asking the executor or next of kin to pay this debt. Often they will assign these debts to collection agencies. These collection agencies often harass you and demand payment. But understand that credit card companies need to file a claim with the probate court against your parent's estate in order to collect. They must prove to the probate court that they have a valid claim. It is not up to you to satisfy your parent's debt. Creditors must go through the proper channels to get paid.
Are You Responsible for Your Parent's Mortgage?
The answer to this question depends on whether you want to keep your parent's property. If you do, then the mortgage must be paid by someone. Otherwise, the bank or lender will foreclose on the property and repossess it. Unless the mortgage balance on the house is more than the house is worth, do your best to keep the house from going into foreclosure. This is especially true if there is significant equity in the property.
If your parent's will states the property is to be sold and divided among the beneficiaries, then generally the executor would use estate money to keep the mortgage current until the property sells. However, if the will does not direct the sale of the real estate, it can be trickier, especially if there are multiple heirs and beneficiaries.
In Tennessee, when a person dies their real estate is immediately vested in the heirs or beneficiaries of the estate, unless the will specifically brings the property into the estate to be managed by the executor. Real estate is typically not controlled by the administrator or executor through the probate process. As such, the actual owners of the real estate - those who inherited it - would be responsible for the mortgage to keep the house from foreclosure.
Bottom line: If there is an outstanding mortgage, it needs to be paid in order to keep the property from going into foreclosure. If your parent's will does not bring the property into the estate, then at least one heir or beneficiary that receives the property must keep the mortgage current to keep it from foreclosure. If you do not want the property, then you simply do not pay the mortgage and the bank will foreclose.
If I Do Not Pay My Parent's Mortgage Will It Affect My Credit?
If your name is not on the mortgage, failing to pay your parent's mortgage will not affect your credit. After all, the mortgage is in your parent's name, not yours.
What Happens If I Do Not Pay My Parent's Car Note?
Like real estate, a car loan is secured by the value of the vehicle. If you chose not to pay your parent's car note, then the bank or lender can repossess the vehicle. So you will need to decide whether you wish to keep the vehicle and pay the note, or not pay the note and allow the vehicle to go into foreclosure. You could also sell the vehicle and use the proceeds of the sale to pay off the note.
Worried About Your Parent's Debts?
If your mother or father recently passed away and you have questions regarding how to deal with their debt, give Crow Estate Planning and Probate a call at 931-218-7800. We are happy to speak with you about your situation and provide a solution to your issues.