When someone passes from this life to the next, he leaves his earthly wealth behind. If the deceased had debts, those stay behind too, and loved ones may have to deal with them.
(Laws related to how a decedent's debts are handled differ from state to state. For specific guidance, consult an estate attorney.)
Debts fall into two categories: secured and unsecured. “Secured” debts have collateral —an asset the lender could take if the debt isn’t paid. Mortgages, home-equity loans, and car loans are secured debts. In contrast, credit card debts, school loans, and medical debts fall into the “unsecured” category.
After death, some obligations — typically secured debts — may pass to a spouse or other beneficiary who assumes responsibility for making regular payments. Other debts become the responsibility of the decedent’s “estate” — the legal term used to describe the cash and other assets someone owns at death. The executor — the person chosen to settle the estate — uses those assets (including proceeds from sales if necessary) to pay the debts.
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