When a loved one passes away your thoughts will initially be occupied with taking care of their funeral, and then the mourning process begins. Once your life begins to return to normal you then need to focus on your financial status, and in particular the financial affairs of your deceased spouse, and whether or not you’re liable for any of their debt.
Your legal liability to repay any of your spouse’s debt will depend entirely on which state you reside in. If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin or Alaska you will be responsible for those debts because these are “community property” states. A basic definition of community property in relation to debt is that you enjoyed the shared income and assets with your spouse while they were still alive, so you must share their debt burden if they pass away before that debt is repaid.
So, the money, assets and income you enjoyed while both partners were alive is matched by the necessity to repay that debt regardless of who actually signed up for it, but only in community property states. The flip side of this that you cannot be pursued for any debts incurred by your spouse before you were legally married.
In the event that there is very little community property (i.e. assets) remaining after the passing of your spouse you would also have little, if no, liability to repay those debts because you lack the means to do so. The creditors can only demand repayment if you have the financial means to pay off any outstanding debts. Creditors can, however, conduct an asset search to uncover such assets as could be used to repay the money owed to them, so if you attempt to hide any community property they can discover it by doing this.
If you are not living in a community property state you can inform the creditors that you have no legal liability to repay your spouse’s debts. They may attempt to use threats against you, but this is when you should seek professional legal advice, while also informing the various creditors that they cannot pursue you for these debts.
Creditors cannot pursue the living spouse for any income earned after the death of their partner – this does not count as “community estate”. It’s also worth noting that there is a statute of limitations on such claims by creditors of no more than 12 months. If they fail to enforce repayments during that timeframe then no debt is due. A pre-nuptial agreement can also invalidate any claims by creditors to your spouse’s remaining income or assets because the terms of the pre-nup could well mean that you do not have access to those. In effect, you are left with what assets you possessed before you got married.
Declaring bankruptcy is the final step in avoiding spousal debt, especially a Chapter 7 filing which will discharge most, if not all, non-estate debts. So, even if you reside in a community property estate there are several steps you can take to avoid repaying debts you do not feel are yours to repay. And even if you are held liable for such debts, filing a Chapter 7 bankruptcy can relieve you of the financial pressure to repay debts your spouse was responsible for.