Dealing with debts of a deceased relative in Michigan

On Behalf of | Mar 2, 2022 | Estate Planning

When someone passes away in Michigan, their debts don’t die with them. If they had any outstanding balances, the responsibility of paying those bills falls on the shoulders of their estate. However, there are times when their family members might be held responsible. If your relative died and left behind some debts, here’s how you can deal with it.

Find out the debts they had

The first thing you should do is request a copy of the credit report from the three major credit bureaus in Michigan: Equifax, Transunion, and Experian. The bureaus will give you a list of all of the outstanding balances.

With this information, you will need to prioritize the debts. First, pay funeral expenses and medical bills, and then handle secured debts like mortgages and car loans. After that, you can focus on unsecured debts like credit card bills and personal loans. Remember to only use the deceased person’s estate to clear these debts. You are not responsible for paying them yourself unless in special circumstances. The probate court will hold you responsible for the deceased’s debts if:

  • You cosigned a loan with the deceased.
  • You’re an authorized user on a joint credit card account.

What happens if the estate is insolvent?

An estate is considered insolvent if the debts exceed the value of the assets. This can happen if the deceased has a lot of debt or very few assets. If this occurs, creditors will only collect a portion of what they’re owed. The rest of the debt will be forgiven. In addition, the deceased’s family members will not receive any inheritance.

Assets protected from creditors

Creditors cannot have a claim to some of the deceased’s assets. These include life insurance policies, retirement accounts and trusts.

Debts don’t die with loved ones, so it’s important to take steps to deal with them before distributing an estate. With careful planning, you can make the process easier for everyone involved.