Am I Responsible For My Parent’s Debt?
Posted on December 13, 2021 in Debt
Most of the time, children are not held liable for their parents’ debts. However, if you have a joint account on any credit cards or loans, you will be responsible for paying off the balances owed.
Debt is a burdensome and harrowing experience that impacts the lives of people who have borrowed money from a lender and couldn’t pay it back in time. As the deadline for payment approaches, you start getting more and more agitated and helpless, not knowing what to do. Moreover, debt stress is also known to link to a great deal of depression, anxiety, and a prelude to diseases like hypertension and diabetes.
As much as you would like to stay away from borrowing money or owing it to someone, you can’t help it if your parents are, or were, in debt. This article covers all the ways in which your parents’ debt may affect you.
When Do Children Find Out About Their Parents’ Debt?
Generally, children are kept out of the loop when it comes to the financial situation of the house, even when they grow up to be adults. The only time they get to know about the family’s finances or debts is when the parents need them to contribute money or the unfortunate demise of the parents. In both cases, if the parents are in debt, then it can be quite distressing for the children.
Debt isn’t a good thing, but people who borrow money are forced to do it out of need, either to provide for their family, cover a huge medical expense, get the house repaired, or many other reasons. The borrowed money turns into debt when it can’t be paid on time and interest starts accumulating on it.
With the growing inflation and decreasing income for seniors, it can be difficult for them to pay back the money they owe a lender on time, which is why some debts carry forward for several years. Often times a good strategy is to find debt relief in order to break free from payments and start growing wealth again.
Is Your Parents’ Debt Transferrable to You?
The good news is that in most cases, you won’t inherit debt or be held responsible for paying your parents’ debt, whether they are alive or deceased. Unless you have co-signed any of their loans or leases, you aren’t liable to pay the lenders or creditors a penny. However, the rules and regulations vary according to the type of debt your parents have and where they live.
In their lifetime, you won’t be held responsible for paying off their debt, unless your parents specifically tell you to, or you decide to help them out. Even if they have unpaid credit card bills or several overdue installments for their loan, you don’t have to worry about the creditors coming after you or calling you repeatedly. You may choose to help them with the credit card debt settlement process or any other debt, but that is your discretion. The same applies to their medical debt, mortgage, taxes, etc.
If you have recently lost your parents and just found out about any unpaid debt that they left behind, you may need to get in touch with a lawyer to find out whether you are liable to pay it. If your parents had an estate lawyer, they are the ones you should consult with. Whenever a person leaves behind an unpaid debt, it has to be paid out from their estate, i.e. assets and finances that they had.
How Your Parents’ Debt May Affect You
If you’re still wondering, “am I responsible for my parents debt?” If so, although we have established that your parents’ debt won’t be carried forward to you, and you won’t be liable to pay it for them, there are a few ways in which the debt may affect you. First of all, whatever your parents leave behind is called their estate, and it may include their belongings, assets, real estate, investments, collectibles, finances, etc.
By law, if parents pass away, all of their estate will be inherited by all their children, unless they have named someone else in their will. If you are their only child, you should inherit everything they left behind. However, before you can gain ownership of their estate, it will be used to pay off any debts they may have. Therefore, the debt is settled before the estate can be divided or claimed by the beneficiaries.
Chances are that a major portion of the estate, or all of it, may go towards paying the debt, especially if your parent took out a large loan for business or any other purpose. Therefore, you may be left with little or nothing, and this can be distressing for most people.
The second scenario in which you are affected by your parents’ debt is if they don’t have enough money in their estate to cover all of the debt. In most states, the law requires the creditors and lenders to write off the loan if the estate can’t cover it. However, some states might not have this regulation, which means that the creditors might choose to come after you.
Am I Responsible For My Parent’s Debt?: Final Thoughts
This brings us to the end of our article, and we hope you now have a better understanding of if you’re responsible for your parents debt. However, if you have a joint account on any credit cards or loans, you will be responsible for paying off the balances owed. In a nutshell, you don’t have anything to do with your parents’ debt, but it can be quite mellowing to know that your parents are, or were, going through a hard time and were struggling to make ends meet when they were raising you. If your parents have been in debt, let this be a lesson for you to stay away from debt as much as possible. You don’t want to end up responsible for debt like your parents may have been.
Related article: My Parents Are in So Much Debt: How to Help?
Author Bio: Lyle Solomon has considerable litigation experience as well as substantial hands-on knowledge and expertise in legal analysis and writing. Since 2003, he has been a member of the State Bar of California. In 1998, he graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California, and now serves as a principal attorney for the Oak View Law Group in California. He has contributed to publications such as Entrepreneur, All Business, US Chamber, Finance Magnates, Next Avenue, and many more.
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