Settling Estate With Large Mortgage

Added June 30, 2007 by Ilyce R. Glink

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Summary: When a person dies, all of the assets in an estate would typically be sold, and that cash would be used to pay off the person's creditors. Any financial assets in the estate would also be liquidated to pay off any remaining debt. If there is anything left in the estate after the debts have been repaid, it would be distributed according to the terms of the will.

Q: My mom recently passed away. She lived in a mobile home for 10 years and had a 30-year mortgage.

Needless to say, she was upside down in her loan and the mobile home isn't worth what she would still owe.

Neither my brothers nor I want to live in the home (only 2 of us live in the area). Are we responsible for paying off this loan if we were to sell the mobile home at a loss?

A: My condolences on the recent death of your mother. Cleaning up the estate of a loved one is never easy, particularly when there are debts that cannot be repaid.

Typically, all of the assets in an estate would be sold, including a house, car, furniture, boats, motorcycles, etc. Whatever cash these assets bring in would be used to pay off your mother's creditors. If your mother has any financial assets, such as life insurance, cash in a banking or savings account, CDs, stocks or bonds, these would also be liquidated to pay off any debt that remains, including the mortgage, credit card debts, car loans, student loans or tax liens.

If there is anything left in the estate after the debts have been repaid, it would be distributed according to the terms of the will. If your mother died intestate (without a will), then the assets would be distributed according to state law.

The good news is that unless you are named on her mortgage, other loans or credit cards as a co-borrower, you should not be responsible for paying off whatever debt remains after the assets have been sold.

Generally, our debts die with us. Please talk to a local estate attorney for more details on how to close your mother's estate.

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