What happens to people after death? No one knows for sure – but one thing is certain: if they are in debt in California at the time of their death, some of their debts will have to be paid. This is because California is a community property state, meaning that a marriage or a registered domestic partnership makes both parties one “community.” This gives creditors the right to pursue certain debts even after the passing on of the debtor.
Here are three kinds of debts a creditor can pursue when the debtor dies in California:
Mortgages and equity loans
When an individual has sole ownership of both the property and the mortgage, their estate will be responsible for paying back any outstanding mortgage amount when they die. And if the home is inherited, the new owner may be required to pay the mortgage if the property is directly passed over to them. In that case, the new homeowner may sell the property to repay the debt or assume ownership and continue servicing the mortgage or home equity loan associated with the property. If there is a co-signer on the mortgage, they are directly responsible for the debt since they jointly signed up for the mortgage with the deceased.
Credit card debts
Credit card debt falls under unsecured debt. Thus, the credit card company can only recover their money from the deceased’s estate. However, if the account was jointly held, the surviving account holder will be required to pay the credit debt as they are equally responsible for the debt.
Car loans
A car loan is a type of secured debt. As such, it is typically paid out of the deceased’s estate. However, if the deceased’s estate cannot pay off the loan, and their heir wishes to keep the car, whoever takes over the vehicle will be required to settle the outstanding loan amount.
As a general rule, some consumer debts do not go away when the debtor dies. Mastering California’s debt settlement laws can help you understand your rights and recover what is duly yours in the unfortunate event of the debtor’s passing before clearing their debt.