The question of what happens to someone’s debt when he or she dies has become increasingly salient during the recession and sluggish recovery, according to legal and financial advisers. More and more heirs in Florida and elsewhere are finding themselves saddled with debt from devalued properties, credit card bills and other sources. Probate litigation experts have become valuable resources for this group, helping them navigate the complex legal regulations regarding debt after death.

Credit cards, loans, mortgages and other debts disappear if they were solely in the borrower’s name. Complications arise, however, when a co-signer or guarantor is involved in the borrowing process. Children or spouses who choose to co-sign for housing or medical bills will be held financially responsible for the remaining debt. When you co-sign a loan, you promise that the loan will be paid if the primary borrower cannot do so. That provision includes the borrower’s death.

In community property states (Florida is not one), spouses are automatically responsible for all debt acquired by their husbands or wives. That means that a spouse could be stuck paying off debts they didn’t know existed, according to legal experts.

In many cases, debt after death is not a problem. Even people with co-signed loans who die with more assets than liabilities should be able to cover their debts with the money from an estate. The funds that remain are then distributed according to the probate agreement. If liquid assets do not cover debts, then the will’s executor will generally sell off cars, homes and other assets to meet the debts. It is important to remember that creditors are seen as more important than heirs.

Some funds may be exempt from creditor’s reach, however, including life insurance, retirement benefits and some special land holdings. It is best for Florida residents to consult a probate attorney to determine which assets can be shielded from creditors.

Luis E. Barreto