Debts do not vanish after a person’s passing. With this in mind, you may worry that your family will inherit your debts after you pass away. To understand what happens to your debts, it is important to familiarize yourself with the probate process and its role in settling what you owe your creditors.
How does the state handle your debt if you pass away?
In Connecticut, after you pass away, the executor or administrator will gather your assets, inform the entities you owe debts to – the creditors – and use your estate to pay off your debts. This is known as the probate process. According to state law, there is a general order in which debts are paid:
- Funeral and burial expenses
- Estate administration costs
- Expenses of your last sickness
- Taxes, both state and federal
- Wages for laborers or mechanics
- Other preferred claims
- All other claims, such as unsecured debts
Afterwards, the executor or administrator will distribute what remains of your estate to your heirs according to your will. Similarly, creditors who miss the deadlines to claim what you owe them can lose the right to payment, though these deadlines vary by probate orders. It is important to consider what might happen to your debts if you do not have enough assets to cover what you owe.
What happens if your estate cannot pay off your debts?
If your estate lacks the funds necessary to cover all of your debts after your passing, creditors may write it off. This leaves the debts you owe unpaid. This means that your family does not have to pay in your stead and creditors cannot collect from them. However, creditors may still collect debts from your family if:
- A family member co-signed a debt with you
- They hold a joint credit account with you and the contract makes them liable
- They receive property through fraudulent transfers meant to avoid creditors
In Connecticut, you usually pay off your debts using your estate through the probate process, not by your family. However, your co-signers and jointly liable account holders must still pay off your debts, even if you pass away. This means that under normal circumstances, your family will not inherit your debts after your passing.