Credit Q&A: Can You Inherit Bad Debt?

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Q: Can you inherit a deceased person’s bad debts?

A: Only if you choose to.

“You can’t inherit someone’s obligation to pay,” Robert Markoff, a Chicago-based collections attorney, says, but if you do choose to keep, for example, a house that still has a mortgage on it or a car with an unpaid auto loan attached, you’ll have to pay the balance.

Markoff explains that people who inherit items with loans – or, worse yet, liens on them – typically have three options:

  1. They can return the item in question to the creditor, which will sell it and give the heirs any profits left over after the debt has been paid.
  2. They can choose to sell the item themselves and use whatever money they make to pay off the debt.
  3. They can choose to formally take over ownership of the item – and the debt attached to it – after working out a payment plan with the creditor.


It’s important to note that those who inherit a distressed property or a car eligible for repossession aren’t automatically held responsible for these debts on their credit reports.

“Your credit score would remain intact,” Ken Lin, CEO of CreditKarma.com, says, because the bad debt is attributed to the lien holder who was responsible for the delinquency whether they’re still around or not.

Your own credit would be impacted, however, if you went with option three and formally assumed ownership of the item in question and then fell behind on payments.

“Once you assume ownership, it’s your responsibility to pay,” Lin says.

He also points out that you can’t inherit someone else’s credit card debt.

“People may pay it out of guilt,” Lin says, but, unless their name was on the account to begin with, they don’t have to.

Want to know what can and can't affect your credit score? Email your questions to editors@mainstreet.com.

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