Get the knowledge you need to protect your assets

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What happens to credit card debt when you die is a question that can seem difficult to answer. The last thing you want to do is leave your heirs with unwanted liability for unpaid credit card debt.

We’ll unbox the issues and offer the knowledge you need to protect yourself and your family.

Here’s the first thing to know – your creditors cannot continue with credit card debt payments after your death. However, never think that death is the ultimate solution to credit card debt relief. There are many other ways to get rid of credit card debt.

Among the many nasty things your survivors face after your death, dealing with your credit card debt and other dues may be one of them. Before deciding to repay debts, they may face annoying collection calls from creditors.

A 2016 Experian survey indicates that about 73% of people die with a combination of credit card debt, mortgage, personal loan, student loan, etc. About 68% of people die with credit card debt over $ 4,500, on average.

If you are wondering what happens to your credit card debt after you die, or if your survivors will be responsible for it, in most cases the answer is “no”. Usually your assets are used to pay off any debt you owe.

1. What to do after the death of a cardholder

What if you are held responsible for paying off the credit card debt of the deceased?

Here’s what to do after the primary cardholder dies.

  • Stop using the card – First, do not get into more debt, even with an authorized user. It is considered fraud if you are not the primary user.
  • Make a list of overdue credit card accounts – If you are the surviving spouse, gather all the documents and list the debts to be repaid.
  • Notify creditors and credit bureaus – You will have to close the account if it was only in the name of the deceased person. If you are a joint account holder, you can use the card as the sole account holder. However, be aware that the terms and conditions of the card may change depending on the card agreement. You should also inform the three major credit bureaus. To do this, provide a copy of the death certificate as well as the SSN of the deceased person. If you are not the spouse of the deceased, you must prove that you are the executor of the estate.
  • Clear Outstanding Credit Card Debt – Remember that a single late payment will negatively affect your credit report even if you do not wish to use the card.

Therefore, if your name is on the card, make a payment on time if possible. If you can’t clear the entire amount, pay as much as you can. A negative list will stay on your report for seven years and it may be difficult for you to take out a loan on reasonable terms in the future.

  • Do not make payment if you are an authorized user – The creditor can hold you responsible for the entire unpaid balance if you make the payment.

Consult a lawyer if you live in a community property state.

2. How creditors are repaid

After you die, your assets are used to pay off your credit card debt. Then the remaining property is distributed to your heirs. The executor of your estate takes care of all of these things.

You may be thinking, who is the executor? If you have a will, it’s someone you named in your will. If you don’t choose, it may be someone appointed by the probate court.

An estate is everything a person owns at the time of death. It includes assets as well as money in the bank. All of these are collectively called a domain.

3. What if you owed more than the sum of your assets?

This means that your estate is insolvent. In this situation, your heirs may have to pay off your credit card debt. However, it depends on several factors.

If you have a joint account holder, they may have to shoulder the burden of credit card debt and pay it off. When you jointly apply for a credit card, you both agree to pay off the outstanding credit card balance. The same principle applies to a co-borrower or to a sender. They are responsible for reimbursing the balance due.

However, an authorized user is not legally responsible for reimbursing the unpaid balance of the deceased.

4. Assets you cannot use to pay off creditors

Although the assets are used to pay off the deceased’s credit card, there are some restrictions. Credit card debt is considered the lowest priority compared to other obligations, such as secured loans backed by collateral.

State law determines which creditors have the highest priority if your estate cannot meet the remaining amount.

Here are some assets the executor cannot use to pay off the debt:

  • Life insurance proceeds
  • Brokerage accounts
  • Retirement accounts
  • Assets in a living trust

5. FAQ:

So far we have discussed the scenario in general terms. Now, let’s target some common questions and find the answers to help you better understand the situation.

I. What debts are forgiven when you die?

As mentioned, after a person dies, both assets and liabilities pass to their estate. Penalties are paid before the proceeds are handed over to the heirs.

We have already discussed what happens when a person’s debt exceeds what the estate covers.

Let’s discuss some of the debts in detail:

  • Secured Debt – If the heir inherits the house, then he or she must pay off the mortgage. If it is not paid, the bank can take the house to meet the remaining mortgage amount from the proceeds of the sale.
  • Unsecured Debt – With credit cards and personal loans, the outstanding balance is paid off from the assets of the estate. Usually, no one has to pay anything if there is no co-signer.

ii. What Happens To Credit Card Debt When You Die With No Money?

After a person dies, the remaining debts are paid from the assets left by the person. When the person has no support, or more specifically, insufficient assets to cover the credit card debt, the heirs may have to pay off the unpaid debt.

iii. Is the wife responsible for the credit card debt of the deceased husband?

If you live in a community of property state or your husband opens a credit card account after you get married, it is automatically a joint account. Hence, you will be responsible for repaying the debt amount.

It is best that you pay off debt, if possible, to maintain a good credit rating.

The community property states are:

  • Nevada
  • Alaska (Residents must choose community ownership by signing an agreement)

However, the law may differ from one community property state to another.

iv. What if an account is mistakenly flagged as “deceased”?

Sometimes creditors mistakenly declare both spouses as deceased. If this happens, be sure to correct the error. Send a notarized letter to the credit bureaus confirming your identity. It should include your full name, current mailing address, date of birth, social security number (SSN), and a statement proving that you are not deceased. There are also provisions for updating these documents online.

v. Do I have to pay off the credit card debt of my deceased parents?

A child is not responsible for debts incurred by his parents unless he has co-signed the credit card contract. If he is the sender, the child will have to reimburse the outstanding amount. In doing so, the amount inherited will be less, but they will have to bear the loss.

vi. Can debt collectors harass the relative of the deceased to pay off credit card debt?

The answer is no.’ According to the Fair Collection Debt Practices Act (FDCPA), debt collectors cannot use unfair or deceptive practices to collect the remaining amount of debt from a relative.

However, collectors may contact the following persons, during the hours mentioned, to discuss the unpaid debts of the deceased:

  • Joint
  • Guardian
  • Executor
  • Administrator
  • Parents of a minor child

A debt collector can also contact someone who can pay off the credit card debt of the deceased person’s estate.

Suppose someone thinks the debt collector is breaking the law. In that case, they can send a cease and desist letter to the tax collector, file a complaint with the Consumer Financial Protection Bureau, report it to the FTC, or file a complaint with the state attorney general.

It is always best to consult a lawyer who is familiar with inheritance laws. An experienced lawyer can guide you and answer your questions.

Finally, I would like to suggest this: why not get out of credit card debt before it gets nasty? First, it’s always best to avoid getting into debt. Swipe your card for an amount you can refund each billing cycle. However, if you have to get into debt due to an emergency, go for credit card debt relief options without wasting time. The sooner you start paying off your debt, the less interest you will pay. It will be much easier to get credit card debt relief and manage your finances better.

What options do you have for getting out of credit card debt?

One of the appropriate options for getting credit card debt relief is to go for settlement when your debt amount is high. You can also consolidate your credit card debt if your main concern is managing multiple accounts, but you can pay off all of the debt. If you are overloaded with debt, you may need to file for Chapter 7 or Chapter 13 bankruptcy.

You can first contact a reputable counseling agency to discuss your debt relief options. They can analyze your financial situation and offer you a suitable option for credit card debt relief.

Whichever option you choose, make sure you get your debt problems sorted out quickly and manage your financial life in the best possible way.


Lyle Solomon has considerable litigation experience as well as substantial practical knowledge and expertise in legal analysis and drafting. He graduated from the McGeorge School of Law at the University of the Pacific and is now Senior Counsel for the Oak View Law Group (https://www.ovlg.com/).



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