It's not possible to get away from debts, loans, mortgages, and lines of credit in the contemporary world. However, it is considered a bad and unforgivable sin in Islam if a Muslim dies with unpaid debt. Before we go through a few hadiths to give you insight, you should know that your debt can be paid in full by creating your Islamic Wills or Trust. There is no other way to pay the debt after death. Not having an Islamic estate plan means no executors or trustees assigned responsibilities for paying off debt. The legal laws and Islamic Laws are aligned in this respect. Instead, creditors have more upper hand in Islam compared to Legal laws. People can find a way to circumvent the debt through illegal estate planning but all that is not allowed under Islamic law. We should appreciate the laws of Islam that allow a believer to pay off debts and purify his or her sins before departure. Before we start, look at the following quote from Holy Quran.
"O believers! When you contract a loan for a fixed period of time, commit it to writing. Let the scribe maintain justice between the parties. The scribe should not refuse to write as Allah has taught them to write. They will write what the debtor dictates, bearing Allah in mind and not defrauding the debt…" - Holy Quran, Sarah al-Baqarah, verse.282
It was narrated from Abu Hurairah that the Messenger of Allah (Sallallahu Alayhi Wasallam) said: “The best of you - or among the best of you - are those who pay off their debts in the best manner.” -Sunan Ibn Majah, Vol. 3, Book 15, Hadith 2423
Narrated Abu Hurairah: Allah's Messenger (Sallallahu Alayhi Wasallam) said, "If I had gold equal to the mountain of Uhud, it would not please me that it should remain with me for more than three days, except an amount which I would keep for repaying debts." -Sahih al-Bukhari 2389, Book 43, Hadith 5
It was narrated that ‘Uthman bin 'Abdullah bin Mawhab said: “I heard 'Abdullah bin Abu Qatadah narrate from his father that a corpse was brought to the Prophet (Sallallahu Alayhi Wasallam) for him to offer the funeral prayer, and he said: 'Pray for your companion, for he owes a debt.' Abu Qatadah said: 'I will stand surely for him?' The Prophet (Sallallahu Alayhi Wasallam) said: 'In full?' He said: 'In full.” And the debt he owed was eighteen or nineteen Dirham.” -Sunan Ibn Majah, Vol. 3, Book 15, Hadith 2407
It was narrated from Thawban, the freed slave of the Messenger of Allah (Sallallahu Alayhi Wasallam), that the Messenger of Allah (Sallallahu Alayhi Wasallam) said: “Anyone whose soul leaves his body and he is free of three things, will enter Paradise: Arrogance, stealing from the spoils of war, and debt.
-Sunan Ibn Majah, Vol. 3, Book 15, Hadith 2412
Narrated Salama bin Al-Akwa`: A dead person was brought to the Prophet (Sallallahu Alayhi Wasallam) so that he might lead the funeral prayer for him. He asked, "Is he in debt?" When the people replied in the negative, he led the funeral prayer. Another dead person was brought and he asked, "Is he in debt?" They said, "Yes." He (refused to lead the prayer and) said, "Lead the prayer of your friend." Abu Qatada said, "O Allah's Messenger (Sallallahu Alayhi Wasallam)! I undertake to pay his debt." Allah's Messenger (Sallallahu Alayhi Wasallam) then led his funeral prayer. -Sahih al-Bukhari 2295, Book 39, Hadith 6
It has been reported on the authority of 'Amr b. al-'As that the Messenger of Allah (Sallallahu Alayhi Wasallam) said: All the sins of a Shahid (martyr) are forgiven except debt. -Sahih Muslim 1886 a, Book 33, Hadith 179
Abu Hurairah (May Allah be pleased with him) reported: The Prophet (Sallallahu Alayhi Wasallam) said, "The soul of the deceased believer remains pending on account of the debt till it (the debt) is repaid." -At-Tirmidhi, Book 7, Hadith 943
Narrated Abu Huraira: Allah's Messenger (Sallallahu Alayhi Wasallam) said, "Procrastination (delay) in repaying debts by a wealthy person is injustice."
- Sahih al-Bukhari 2400, Book 43, Hadith 16.
Abu Sa'eed said: "I heard the Messenger of Allah (SAW) say: 'A'udhu billahi minal-kufri wad-dain. (I seek refuge with Allah from Kufr and debt.)' A man said: 'O Messenger of Allah, are you equating debt with Kufr?' The Messenger of Allah (Sallallahu Alayhi Wasallam) said: 'Yes.'" -Sunan an-Nasa'i 5473, Book 50, Hadith 46.
A'isha, the wife of the Messenger of Allah (Sallallahu Alayhi Wasallam) reported: "The Apostle of Allah (Sallallahu Alayhi Wasallam) used to supplicate in prayer thus:" O Allah! I seek refuge with Thee from the torment of the grave, and I seek refuge with Thee from the trial of the Masih al-Dajjal (Antichrist) and I seek refuge with Thee from the trial of life and death. O Allah! I seek refuge with Thee from sin and debt." She ('A'isha) reported: Someone said to him - (the Holy Prophet): Messenger of Allah! why is it that you so often seek refuge from debt? He said: When a (person) incurs debt, (he is obliged) to tell lies and break promise".
-Sahih Muslim 589, Book 5, Hadith 163
Allah, the Most Glorified and the Most High, knows the best. As a human, We are limited to everything and can not perceive it in totality...