Inheriting debt: The impact of debt on loved ones should the borrower unexpectedly die

by. Nikki Griggs

What do Thomas Jefferson, Judy Garland, and Michael Jackson have in common? They each left a tremendous amount of debt behind when they died. With their wealth and assets, it’s easy to imagine the red tape and the burden this put on their loved ones.

But perhaps you’re thinking that a founding father and a couple of wealthy, out-of-touch celebrities may not be the most relatable trio. Fair enough. Then what about debt that is left behind by the average American today? Is it forgiven when someone unexpectedly dies?

It’s widely known that consumer debt has touched all generations culminating with 2009’s Great Recession. From Baby Boomers affected by the mortgage crisis to the Millenials’ huge student loan debt to the staggering credit card debt across the boards, many Americans find themselves in precarious financial straits. But what may be equally alarming and less known is the significant impact that a loved one’s debt can have on his or her survivors if arrangements had not been made for post mortem coverage.

According to a recent Securian survey, nearly one-third of respondents said they have not thought about what would happen to their debt if they—or their cosigners—unexpectedly passed away.

Debt does not, in fact, die with the borrower, and surviving family members and cosigners will find themselves in the hole even after liquidating assets unless advance arrangements have been made.

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