Question:
I'm a 20-something single woman. Who is responsible for my debts if I die? I have some credit card debt, and a loan that I'm paying off, but that's all. I did take the insurance option on both. Is this adequate? I would hate to saddle my parents with my debt should anything happen to me.

Answer:
If you took a credit protection policy on your debts, then the policy will settle those debts on your behalf. If you have a loan that is not secured by a policy your estate will be responsible for paying those debts.

If you have any assets that you have left to family members, the executor of your estate will have to make sure that your creditors are paid before they get anything. The executor will place an advertisement in the newspaper announcing your death asking creditors to make their claim. If, however, you have no assets but you die owing money, your creditors will have to absorb the loss.

The only way your family can be liable for your debts is if one of them signs a surety on your behalf. If you apply for a loan and your credit history is such that you need someone to sign as a back-up, then that person will become liable.

Often parents sign surety for their children when they purchase their first car, or for a student loan. You should always get an attorney's advice before signing surety, and read through the contract before signing, to avoid being liable for an unlimited amount.

Credit protection policies can be expensive so if possible try to avoid them; if you have life cover this should cover your outstanding debt.