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What happens to my car payments after I die?

Expired parking meter. Stock photo by Getty Images

You can’t take it with you, as the saying goes. Once you die, you leave behind all your carefully amassed assets, property and, unfortunately, debts.

Your debts live on and must still be paid, typically by your estate. That doesn’t apply to the $20 you bet your buddy on the hockey game, but any legally-contractual debts such as a car payment, mortgage, loans, lines of credit, and bill payments.

Once you die, your estate must pay off all debts and taxes before it can distribute any gifts you’ve left, so creditors will seek settlement from your estate.

However, your heirs can’t inherit your debts. If your estate can’t pay outstanding debts, some creditors may pursue your spouse or relatives, but they can’t be held responsible unless their signature is also on a loan contract.

If you had a co-signee or an underwriter on your loan, payments could fall to them.

Some life insurance plans offer debt coverage that pays off outstanding loans. Also, some individual creditors offer their own form of paid insurance or add-ons that cancel the debt in case of death.

If you’re still paying off a car when you die, your executor has a couple of options.

They can keep the car and continue payments from your estate, or pay it off. If they can’t keep the car, the dealer might accept a return.

However, car returns differ from most other consumer products. A dealer doesn’t have to accept the return and if they do, you likely won’t get all your money back. Instead, the dealer may sell the car at auction and apply the proceeds against whatever amount was still owed

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