Hello and welcome back to Naples Life Insurance & Annuity Advisors’ blog! In each blog, we aim to not only inform you on how life insurance and annuities can benefit you, but also give relevant financial advice that can help you reach your financial goals. In our last blog post, we began discussing what happens to debt and specifically credit card debt after you die. First, you must know that debt doesn’t disappear after your death, even though you are no longer around to pay it. Debt is debt and your beneficiaries inherit it like anything else. Also, we have been discussing the steps that must be taken by your beneficiaries to take care of your debt and the other issues that surround the issue of debt after death.

What Happens to Debt After You Die

Your Credit Accounts Are No Longer Used

After you die, those authorized on your credit card account must stop using the card and a surviving spouse should apply for a new credit card. Your spouse will need to apply for a credit card using their own credit, their income amount, and other determining factors. As discussed in our last blog post, if they or anyone authorized on the account uses the card, this is considered fraud.

Your Belongings Won’t Be Split Up Yet

It is typically portrayed in movies or assumed that as soon as you or a loved one passes that it’s time to start passing out those antiques and other items that belonged to the deceased. However, this isn’t the case. The belongings will only begin to be distributed after the estate has finished paying any credit cards and other various debts. These items will be sold or auctioned off to help pay for your debt owed. If the estate doesn’t have enough assets to pay off your debt, your heirs not only don’t get that collectors item or antique, but are also responsible to pay the remaining amount.

Creditors Will Be Contacted

Though creditors are generally seen as the “bad guys,” when a spouse or other is required to pay the deceased’s debt, creditors can often be helpful in finding a solution to help the one paying the debt afford it. Ultimately, they just want to be paid that which they are owed. Even though this is a comforting thought, your heirs or spouse will still have to pay your debt, even if it’s done so in a more manageable way.

If You Have No Heirs, Then the Lenders Lose

Really the title of this section should read “if the estate doesn’t have enough assets to cover the debt owed and there are no heirs, then the lenders ultimately lose,” but that doesn’t make a very good title. Ultimately, if the estate’s assets are insufficient to cover costs and there are no beneficiaries, then the lenders will have to write off the amount and lose.  

So, how does life insurance factor into all of this? In a following blog we will discuss how life insurance can play a key role in not only paying off your debts after you are gone, but even eliminating them before you are gone. To learn more, stay tuned and be sure to visit our website to learn more about our financial advisors and the life insurance we can offer you in Naples.

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