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Debts and the New Jersey probate process

The majority of estate-planning discussions center on an individual's assets. Sometimes, it is not until a loved one has passed away that family members turn their attention to his or her debts. Whatever debts the decedent has that survive his or her death are handled during the New Jersey probate process.

Creditors will first look to a person's estate for payment of those debts. However, other costs and debts are required to be paid before items such as credit cards or student loans. If there is not enough money left in an estate after payment of state and federal taxes, and the individual's last medical expenses and funeral costs, creditors will then look to other sources for payment.

If a debt was jointly held or someone served as a co-signer, he or she may be responsible for the debt. However, if no one else was responsible for an unsecured debt other than the individual, creditors generally have nowhere else to turn. Some companies will attempt to get family members to pay debts, but an individual's family members are under no obligation to do so if they did not have any responsibility for the debt during their loved one's life.

The biggest exception to this rule is a mortgage loan since a home is tied to it. The person who receives the home during the New Jersey probate process will have the option of assuming the loan -- often under the existing terms. If the heir decides that he or she does not want the home, it will be sold by the estate, and the proceeds will go toward paying off the mortgage loan. If there is not enough money from the sale to pay off the loan, once again, family members are not responsible for the deficiency.

Source: CBS Minnesota, "Good Question: What Happens To Our Debt When We Die?", Heather Brown, Dec. 10, 2014

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