Most so-called “financial experts” will tell you that your parents’ debt will die with them. But, that’s not the whole picture. The fact is that you can inherent debt when your name is tied in with your parents’ debt. This happens in particular circumstances.
– Co-Signer
You co-signed a loan with your parents when they needed your good credit standing to get the loan approved.
– Property Ownership
When your parents die, it is common practice to sell their property to pay off their debt. However, if they decide you should inherit it, you inherit the debt that comes with it too.
– Use your Name without your Permission
It is possible that your parents opened a credit line under your name without your knowledge or permission. This could have most probably happened when you were a minor.
– A case of Mistaken Identity
This kind of thing happens when you share the same name with your parent.
What are the actions you can take?
– Mistaken Identity
Ideally, yes, you should be able to easily inform a creditor of the mistake and have it rectified. However, the reality is far from it. A creditor will make switching the name tough because they do want their debt back. You shouldn’t give in. Apart from the name, there will be other details to prove that it is a mistaken identity like date of birth and Social Insurance Number.
They may even send a collection agency after you. If you have to, take the creditor to the Consumer Court and get this sorted, you do not have to pay this debt.
– Using your Name Without your Permission
This one will be a tough one to crack. The creditor won’t give in so easily, but you should inform them that you had no knowledge. Further on, you may very well have to visit the Consumer Court and try and prove that you were not aware of this.
– Co-signer and Property Ownership
The best option for this is to actually pay back the loan. Expect that this inherited debt will negatively affect your credit score.
If your parents are alive
If your parents are alive, then that’s great news because that way you can stop these circumstances from happening to you.
Take a look at your credit report and be aware of every single debt that you have under your name. Often, many forget they co-signed a loan because it was their first loan or they needed an education loan.
Talk with your parents. If your parent’s financial debt is going to affect you, you should very well be concerned. Sit down with them and go over their financial history. Identify co-signed loans, mortgages and any other property loans. Lend a hand in helping them pay it off. If you do find a situation where they have used your name to open an account without informing you, you do have to confront them, but it is more important that you solve the situation on hand.
If you have inherited debt or your parents do have debt and you feel it may be transferred to you, you should definitely look at options to see how the debt can be eliminated. Don’t hesitate to get in touch with 4 Pillars Debt Consultants, we have the knowledge and experience to help you out.
