Can Creditors Go After My Kids for My Debt?

The U.S. Government got in trouble in the media earlier this year when it began seizing tax refunds from people to repay debt incurred by an older relative.

The cases had to do with overpayment by Social Security for benefits paid out to relatives decades earlier. Previously, there was a 10-year statute of limitations for tax return garnishment for unpaid government debts. But that changed with one stroke of the pen in 2008, when a single sentence inserted into the farm bill got rid of the 10-year deadline. Until now, it’s been rare for the government to call old debts due by taking tax returns from surviving relatives.

If you die with outstanding debts, generally your estate goes toward settling the debt. Secured creditors are paid first, and everyone has to get in line. Much like bankruptcy, when the money is gone, it’s gone. However, if you have any joint debt, such as a co-signer, or joint account, then the co-signer will be liable for that debt. After all, that’s the point of having them cosign.

Creditors should be notified as soon as possible after a debtor’s death so they can take the appropriate steps and monitor account activity. This will also prevent them from contacting survivors regarding overdue bills. You should never use an account or incur new debt as a joint account holder if you are aware that another account holder is gravely ill or near death; to do so knowingly is considered fraud.

But you don’t have to die for creditors to go after your kids or other family for debt—if you file bankruptcy at all while holding joint accounts, the automatic stay prohibits creditors from going after you, but any joint account holders or cosigners can absolutely be held liable for that debt.

Over the past 33 years, the Law Offices of Christopher A. Benson has helped over 2,300 of Washington clients take control of their financial situation. We can stop your garnishment and change your monthly payments for all your combined unsecured debt, and if you have had more than $600 garnished within the last 90 days, we can get all of the money back in most cases. But you have to act quickly–call (253) 815-6940 for your free consultation, or email us today. Evening and weekend appointments available.