When a loved one passes away, the survivors usually assume that all debts, including mortgage, loans, and credit card debt are automatically transferred to the next of kin. But this is not accurate.

Generally, debts cannot be transferred through death or even marriage. So when someone passes away, the spouse, children, parents, or other loved one are not responsible for the departed’s debts. However, the debts do not simply disappear with the individual. Rather, the creditors move to recover the debt from the estate – money or assets left behind.

This implies that the estate won’t be divided among beneficiaries until all debts have been settled. Here’s what to expect with different kinds of debt:

Contractual debts

The situation depends on whether the value of the estate is enough to pay all the debt, as well as what the creditor chooses to do. Keep in mind that each creditor follows their own set of guidelines for handling debt, and there are laws that specifically protect survivors from creditors.

Creditors typically try to collect from the estate left behind, though some may also target the spouse and other survivors. Generally, if any of the survivors had co-signed for any of the debt with the deceased, they are accountable for the debt and will have to pay.

Credit card insurance

Some creditors require applicants to take up insurance to cover the remainder of the debt in the event that the debtor is unable to pay. So, you should find out whether the deceased had a credit insurance plan, and whether you qualify for the payment – some insurance policies impose an age limit.

Uncollectable debts

If the value of the departed’s estate is not enough to cover the debt, and the debt was only in their name with no co-signers, then the creditor automatically writes off the debt as uncollectable. That said, the creditor may contact the survivors for proof that there’s no estate, and there’s no way to settle the debt.

Dealing with the death of a loved one is hard and stressful, from the emotional distress to preparing for the burial to handling the finances. Some creditors may try to take advantage of your vulnerability to recover the debt.

If you make any payment, the creditor may argue that you’re responsible for the whole debt, making things more complicated for you. So, it helps to speak to a professional before taking any action. In case you are liable for some of the debt – with evidence of your signature on the contract like if you were joint tenants – you should consider debt counselling to find the best way to settle debt.