Home > Managing Debt > Americans Are Dying With an Average of $62K of Debt

Comments 0 Comments

You’re probably going to die with some debt to your name. Most people do. In fact, 73% of consumers had outstanding debt when they were reported as dead, according to December 2016 data provided to Credit.com by credit bureau Experian. Those consumers carried an average total balance of $61,554, including mortgage debt. Without home loans, the average balance was $12,875.

The data is based on Experian’s FileOne database, which includes 220 million consumers. (There are about 242 million adults in the U.S., according to 2015 estimates from the Census Bureau.) To determine the average debt people have when they die, Experian looked at consumers who, as of October 2016, were not deceased, but then showed as deceased as of December 2016. Among the 73% of consumers who had debt when they died, about 68% had credit card balances. The next most common kind of debt was mortgage debt (37%), followed by auto loans (25%), personal loans (12%) and student loans (6%).

These were the average unpaid balances: credit cards, $4,531; auto loans, $17,111; personal loans, $14,793; and student loans, $25,391.

That’s a lot of debt, and it doesn’t just disappear when someone dies.

What Does Happen to Debt After You Die?

For the most part, your debt dies with you, but that doesn’t mean it won’t affect the people you leave behind.

“Debt belongs to the deceased person or that person’s estate,” said Darra L. Rayndon, an estate planning attorney with Clark Hill in Scottsdale, Arizona. If someone has enough assets to cover their debts, the creditors get paid, and beneficiaries receive whatever remains. But if there aren’t enough assets to satisfy debts, creditors lose out (they may get some, but not all, of what they’re owed). Family members do not then become responsible for the debt, as some people worry they might.

That’s the general idea, but things are not always that straightforward. The type of debt you have, where you live and the value of your estate significantly affects the complexity of the situation. (For example, federal student loan debt is eligible for cancellation upon a borrower’s death, but private student loan companies tend not to offer the same benefit. They can go after the borrower’s estate for payment.)

There are lots of ways things can get messy. Say your only asset is a home other people live in. That asset must be used to satisfy debts, whether it’s the mortgage on that home or a lot of credit card debt, meaning the people who live there may have to take over the mortgage, or your family may need to sell the home in order to pay creditors. Accounts with co-signers or co-applicants can also result in the debt falling on someone else’s shoulders. Community property states, where spouses share ownership of property, also handle debts acquired during a marriage a little differently.

“It’s one thing if the beneficiaries are relatives that don’t need your money, but if your beneficiaries are a surviving spouse, minor children — people like that who depend on you for their welfare, then life insurance is a great way to provide additional money in the estate to pay debts,” Rayndon said.

How to Avoid Burdening Your Family

One way to make sure debt doesn’t make a mess of your estate is to stay out of it. You can keep tabs on your debt by reviewing a free snapshot of your credit report on Credit.com, in addition to sticking to a budget that helps you live below your means. You may also want to consider getting life insurance and meeting with an estate planning attorney to make sure everything’s covered in the event of your death. If you’re worried about leaving behind debt after death, here’s more on how protect your loved ones.

Poor planning can leave your loved ones with some significant stress. For example, if you don’t have a will or designate beneficiaries for your assets, the law in your state of residence decides who gets what.

“If you don’t write a will, your state of residence will write one for you should you pass away,” said James M. Matthews, a certified financial planner and managing director of Blueprint, a financial planning firm in Charlotte, North Carolina. “Odds are the state laws and your wishes are different.”

It can also get expensive to have these matters determined by the courts, and administrative costs get paid before creditors and beneficiaries. If you’d like to provide for your loved ones after you die, you won’t want court costs and outstanding debts to eat away at your estate.

Remember, estate planning can involve more than just drafting a will. Here are 7 documents you’ll need to fill out before you die. How do you deal with your debt and its effect on your plans for the future? Join the conversation on Facebook or in the comments section below.

Image: monkeybusinessimages

 

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other sponsored content on Credit.com are Partners with Credit.com. Credit.com receives compensation if our users apply for and ultimately sign up for any financial products or cards offered.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.



Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team