How to Manage Debt After a Loved One Passes Away

When someone you love passes away, intense emotions, like sadness and anger, can make it hard to think clearly. During such times, managing finances, particularly debt, can feel overwhelming and confusing. Getting organized is crucial. Not only does it help in honoring the legacy of the person you've lost, but it also helps you regain control over your life and finances.

If you recently experienced the death of a loved one, consider the following actions:

Review joint financial accounts. 

After losing a spouse or partner, it's essential to review outstanding financial accounts and debt obligations that were shared or co-owned. This includes bank accounts, credit cards, and loans. Identify accounts with outstanding balances and schedule payments, if necessary.

Promptly reviewing debt obligations can ensure your credit history isn't negatively affected by missed payments on accounts still under both of your names. Late payments damage your credit score, making future borrowing more challenging and costly.

Ask creditors about hardship programs.

Contact the creditor if you’re having trouble making payments on joint accounts. Many of them offer hardship programs for individuals who are undergoing significant life changes, such as the loss of a spouse. Program details vary, but they often include options such as reduced interest rates to make the debt less expensive for a limited time, personalized payment plans that fit your new financial situation, or temporary forbearance, which allows you to stop making payments or reduce your monthly payment for a specified period.

Consider debt consolidation.

A reduction in household income after losing a loved one is common. Combining all your debts into a single loan could bring financial relief. Instead of tracking multiple payments with varying interest rates, you'll only be responsible for one. Not only does this streamline your financial obligations, but it also has the potential to lower the overall interest rate that you're subject to, thereby reducing the amount you have to pay back in the long run.

Understand estate responsibilities.

Generally, when someone dies, debts held solely in their name are paid from their remaining assets, not passed on to their spouse. After these debts are paid in full, beneficiaries can receive the remaining assets. For example, if your spouse had $100k in assets when they died and $80k in credit card and medical bills, the estate could use the $100k to pay off the $80k, leaving $20k to pass on to their heirs.

The estate process varies depending on where you live, the type of debt, and whether you are a cosigner or joint account holder. For further guidance, consult with an estate lawyer.

Speak with a qualified financial counselor. 

An impartial advisor can help navigate financial concerns without adding additional anguish. Sharing debt concerns with someone who isn't emotionally invested in the situation lets you explore your options with less stress. They can also alert you to financial scams that commonly target grieving families of the deceased.

Credit Union of Colorado members can access free financial counseling services through GreenPath(TM) financial wellness. Their counselors can help you navigate your debt obligations by creating a personalized repayment plan based on your situation. Schedule an appointment today.

NOTE: This article is for informational purposes only. Please speak with a qualified attorney or tax advisor for assistance with additional actions you may need to take based on your specific situation.