An individual debt, or personal debt, is an obligation that just one person agrees to repay. This type of debt is also described as debt that is “entered” or “taken” in just one name without another person’s participation. For instance, when you apply for a credit card by completing the application with just your signature, you are personally agreeing to repay any debt that is properly incurred with that credit card.
While living, the sole borrower is the only person required to repay an individual debt; the lender does not have the ability to require someone else to make payments towards that debt.
Just as when a borrower is living, another person cannot be held accountable for the borrower’s personal debts after his or her death. This also remains true even though a person may be related to the deceased debtor, whether by blood or marriage.
For instance, Cliff dies with a credit card that has a $5,000 balance. If this card was opened and held solely in Cliff’s name and used solely for his benefit, the credit card company cannot require his wife, Claire, to pay off the balance with her individually owned assets.
However, it is important to note that all voluntarily incurred debts, such as credit card charges, are contractual and controlled by the terms established by the company. If another person is added to the account as an authorized user, depending upon the company specific terms, he or she may be agreeing to repay all of the debt when using the card.
Repayment By Estate
The fact that Cliff’s family isn’t obligated to pay his debts with their own assets doesn’t mean that the debts are simply forgiven at his death. Cliff’s estate is obligated to pay the credit card balance or as much of it that can be paid before the estate is entirely depleted of assets.
Each state has laws that establish a legal order for the payment of estate obligations, which includes disbursement to beneficiaries or heirs.