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The Federal Reserve's latest report shows U.S. households are in debt to the tune of about $13.2 trillion -- with a "t." Is it any surprise that most people die owing money?

So, what becomes of all of the debt that's left behind? Do your loved ones have to cover the bill?

Here’s what happens to your debt after you’re gone.

Will you leave debt behind?

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The average American dies with more than $61,000 in unpaid bills.

It's likely you will die in debt. Nearly three-quarters of Americans leave outstanding debt when they die, according to a 2017 study from Credit.com, using data from credit bureau Experian.

The average amount of debt at death is $61,554. The average unpaid balances include:

  • Student loans: $25,391
  • Auto loans: $17,111
  • Personal loans: $14,793
  • Credit cards: $4,531

So who's responsible for paying that debt?

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It's unlikely your family members will be required to pay off any of your debts.

When you die, your debt becomes the responsibility of your estate. Your estate includes everything that was yours outright up until the final days of your life: your car, your furniture, your savings, and so on.

Ideally, you'll have written a will and will have chosen an executor to carry out your wishes. When you die, it's the executor's job to negotiate with creditors, write checks from your estate and sell off property to cover your bills.

Creditors may go after only the assets of your estate. Family members should be free from having to pay any of the money you owe, unless they co-signed with you on specific debts.

Even your spouse will not generally be held liable for your debts, unless he or she is a joint account holder or co-signed for a loan.

But note that spouses can be responsible for property debts in community property states including Washington, Wisconsin, Texas, New Mexico, Nevada, Louisiana, Idaho, California and Arizona.

What if the debt can't be repaid?

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Creditors may seize assets to cover debts left behind

When the estate can’t cover a given debt, the creditor usually has the right to seize whatever it is the loan paid for.

For example, if a family member inherits your home after you die but can’t pay off your home equity loan immediately, then the lender can reclaim the house.

Your heir will have the option of selling the home, paying off the remaining mortgage and keeping the balance of the money.

A car with an unpaid auto loan can be repossessed by the lender, unless your heir who gets the car decides to keep making payments.

The executor must try to pay off other debts that could not involve any kind of seizure, like private student loans. But once the estate’s money runs out, creditors are out of luck.

What if you don't leave a will?

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If you don’t have a will or name an executor, then the state will try to locate someone who was closest to you to act as executor.

In most states, the government will turn to your spouse, look for a next-of-kin who can legally inherit under state law, or try to find another person to take on the job.

Whoever acts as executor will then attempt to use your estate to pay off your bills.

If no executor or heirs can be found, then your money will go straight to the creditors — and if there’s anything left, it will be absorbed by the state.

Is anything beyond the reach of creditors?

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Some of your assets will be safe from creditors when you die.

Yes! Creditors cannot touch life insurance policies or retirement accounts. Any assets from these sources go directly to the beneficiaries you've named.

In fact, taking out a life insurance policy is a proven way to protect your spouse’s financial future if you die before you are able to pay off shared debt.

Remember to keep your beneficiary information up to date on your life insurance and your IRA, 401(k) or any other retirement accounts.

If your named beneficiaries die before they can inherit your money, any life insurance benefits or retirement money could become subject to creditors.