Losing a loved one brings a lot of stress to a family. Not only are there emotional scars that must be dealt with, there can be severe financial consequences too. If the spouse was a source of income for the family finances and debts can quickly become out of control. Further, the surviving spouse could be held liable for the debts of the deceased.
Many people assume that the death of a spouse allows for debts to be automatically forgiven or written off by creditors. Unfortunately, this is rarely the case and most debts are still legally collectable from the spouse, with the exception of student loan debts. Even worse, creditors may opt to pursue collection efforts immediately following the event in order to collect on the debt. If the spouse had a will, the will controls the financial affairs of the assets through the estate. Here is where things get complicated.
The executor of the estate is responsible for resolving any debts tied to the deceased before any assets can be distributed. Therefore, there is a chance no assets will remain for division among the surviving family after debts are satisfied, depending on one’s financial situation. If the estate is considered financially insolvent, or lacking sufficient income or assets to satisfy debts, the creditors could pursue collections on the surviving spouse. Commonly held debts are more than likely guaranteed to be pursuable by creditors, leaving the surviving spouse liable. Bankruptcy is one option that may be considered when dealing with debts after the death of a spouse, but the success of the case is highly dependent on the types of debts owed and the financial status of the estate.