Responsibility for Debt in a Negative Net Worth Estate

(Washington State)

My husband and I own several properties on which we owe more than the value. We also both have significant individual credit card debt. We live in a community property state. My husband has a critical health issue. If he were to pass, any estate would have a negative net worth. My husband is concerned about leaving me with a mountain of debt that would consume any life insurance benefit. Would I be responsible for the debt on our jointly owned properties? Would I be responsible for credit card debt in just his name? Would life insurance proceeds be required to pay these debts?

Comments for Responsibility for Debt in a Negative Net Worth Estate

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Sep 16, 2011
Responsibility for Debt in a Negative Net Worth Estate

So sorry about your situation. Unfortunately however, I do not have good news for you. Because you live in a community property state, you and your husband share equal responsibility for all of your financial obligations -- the unpaid balances on your real estate loans, your credit card debt and any other debt either of you acquired during your marriage. Therefore, when your husband becomes deceased, his estate will go through probate and as much of his debt as possible will be paid by the assets in his estate. Once the probate process is over, you will be responsible for paying any remaining debt from your marriage.

If you are not able to pay this debt, it's possible that the proceeds from your husband's life insurance could be taken by your creditors. However, they would have to sue you first, get a judgment against you and get the court's permission to take money from your bank account (where the insurance proceeds are). Other options for collecting what you owe would be for them to garnish your wages and/or put a lien on an asset that you own. The creditors who financed your real estate on the other hand already have liens on those assets and so they could take the real estate back.

Given your situation, I strongly urge you to consult with a consumer bankruptcy attorney in your area. The attorney will look at your financial situation and and advise you about your best course of action. Go here for a consultation with a bankruptcy attorney. I also recommend that you read this deceased person?s debt FAQ.

Best of luck. I know that this is a difficult time for you and your husband and that the last thing you probably want to do is meet with a bankruptcy attorney, but I truly believe that it is a wise course of action for you to take.

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