Ideally, people enter retirement with most or all of their debts paid off. This allows older Pennsylvania residents to make the most of their smaller retirement income without worrying about what may happen to those debts after they die. However, this ideal scenario is not always the case.

Young persons are often taken from their families much too soon as well and may leave debts behind. What happens to those debts? How do they get paid? Most people believe debts become discharged after death. Something this happens, but not always.

NerdWallet reports that debts left behind can cut into assets that heirs might otherwise inherit. In some instances, the executor of the estate may need to liquidate assets to repay debts. That means potentially selling jewelry, the car or even a house. Money in checking or savings accounts may also be used to repay outstanding debts.

Sometimes lenders may reach out to family members about unpaid debts. In cases where family members co-signed on a loan, they may now become responsible for repayment. People who own joint accounts together may also lose some or all of the assets in that account to debt collectors. In addition to this, spouses in community property states may find themselves responsible for the deceased’s debts.

CNBC confirms that when someone passes away, their estate pays debts before there are any distributions made to beneficiaries. The debts that get paid first include funeral expenses, secured debts and taxes. Unsecured debts fall at the bottom of the list. If the estate does not have enough assets to repay the debts then creditors lose out but so do the beneficiaries. However, beneficiaries may also get to hold on to life insurance payments and retirement accounts.