When someone you care about dies, it can be a very hard and emotional time. Not only are you sad about their death, but you may also have to deal with their money and debts. This includes any credit card debt they had when they passed away.
Some people may be wondering who pays off credit card debts after someone dies. The short answer is that the person’s estate is responsible for handling any debts. But there are times when a surviving spouse or other family member could be responsible for credit card debt.
In this article we’ll break down exactly how credit card debt is handled after someone dies who is responsible for paying it, and what you need to know if creditors come calling about your loved one’s debts.
The Deceased Person’s Estate is Primarily Responsible
Everything a person owned at the time of their death is included in their estate. This includes bank accounts, property, vehicles, and any debts they had, like mortgages, loans, or credit card balances.
The executor named in the deceased’s will is in charge of managing the estate. This involves taking inventory of assets and debts, paying off creditors, and distributing whatever is left to beneficiaries named in the will.
The deceased person’s assets are used to pay off any debts like credit cards first before anything can be passed down to heirs. This process is called probate. Creditors must be notified of the death and given time to make claims on the estate for money owed to them.
So, most of the time, the estate uses the deceased person’s assets to pay off any credit card debts. Debtors may have to let the estate’s money go to waste if it doesn’t have enough to pay off its debts.
Exceptions Where Others May Be Responsible
While the estate is primarily on the hook for credit card debt, there are some scenarios where surviving family members could be responsible for paying the balances:
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You were a joint account holder: If you and the deceased were both listed as account holders on a credit card, you are equally responsible for that debt. Creditors can pursue you personally for payment, not just the estate.
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You were an authorized user: Simply being added to someone else’s credit card as an authorized user does not make you liable for the debt. The primary account holder’s estate would be responsible.
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You live in a community property state: If you are the surviving spouse and live in a community property state like Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin, you may be liable for debts that were incurred during the marriage.
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You co-signed on a credit card: If you co-signed on any of the deceased’s credit cards, meaning you agreed to be responsible for repayment, the creditor can pursue you for the balance owed.
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You are the deceased’s spouse: In some cases, surviving spouses may be responsible for certain debts under state law, like medical expenses.
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You are the executor: Executors can be held responsible for unpaid debts if they fail to follow state laws for administering the estate properly.
Settling Credit Card Debt After Death
Here are some steps to take if a loved one dies with credit card debt you now need to deal with:
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Get copies of credit reports and statements: This will reveal all open accounts and balances owed. Contact each creditor to notify them of the death.
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Stop card use: Cancel any credit cards of the deceased and do not use them further. Even if you were an authorized user, these cards should be destroyed or closed immediately.
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Pay from the estate: Use assets in the estate first to pay off credit card bills and other debts. Liquidate assets like bank funds, investments or property if necessary.
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Negotiate with creditors: If the estate lacks funds to pay balances, negotiate with creditors for reduced payoff amounts or payment plans.
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Consult an attorney: Get legal advice to understand your rights and responsibilities. They can also assist with communicating with creditors.
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Explore bankruptcy: Filing bankruptcy may be an option to eliminate credit card debt if the estate has insufficient assets.
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Be aware of collector calls: Bill collectors may contact you regarding the deceased’s debts but must abide by consumer protection laws. Let them know if you are not responsible for repayment.
Can Credit Card Debt be Forgiven After Death?
In most cases, credit card companies will not simply forgive balances owed when someone dies. The debt needs to be addressed in some way, either by:
- Paying it off using assets from the estate
- Negotiating lower payoff amounts with the creditor
- Filing bankruptcy on behalf of the estate
- Making payment arrangements as a co-signer or joint account holder
Sometimes credit card companies may be willing to negotiate or settle for a lesser amount, especially if the estate clearly lacks sufficient funds to pay. However, they are under no legal obligation to forgive unpaid balances unless the debt is discharged through bankruptcy.
The good news is that family members are not generally responsible for credit card debt left behind by a deceased relative unless they shared responsibility for the account. Work with an experienced estate attorney and contact creditors right away to take control of the situation. With time and persistence, you can resolve credit card debt without paying from your own pocket.
In Summary
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When someone dies, any unpaid credit card debt becomes the responsibility of their estate.
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The deceased person’s assets are used to pay off debts before anything goes to heirs.
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Surviving family members are generally not obligated to pay the debt personally unless they were a co-signer, authorized user or jointly liable in some other way.
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Special rules apply in community property states regarding spousal responsibility for debt.
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Executors must properly administer the estate and use assets to settle debts first.
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To resolve credit card debt after a death, communicate with creditors, pay from the estate if possible or consider options like negotiating a settlement or bankruptcy.
Handling financial matters for a deceased loved one can be complicated. Speak to a probate or estate planning attorney if you have questions about who is responsible for outstanding credit cards and how to manage debt during this difficult time.
Notify credit card companies of the death
After you’ve collected the person’s financial accounts, contact each card issuer and request to cancel the accounts. For joint credit cards, you’ll want to notify the issuer that a joint cardholder has died. In both cases, you’ll need to act quickly to avoid interest and finance charges.
Also, find out if any automatic or recurring charges were set up on each credit card account — such as those for phone or utility bills — and cancel or transfer them to another card right away.
Start by calling the number on the back of the card to let them know of the situation. A representative can flag the account and provide the address to which you’ll need to send an official notification letter and supporting documentation, including an official death certificate. Send any documentation by certified mail and save your receipt.
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- Credit card debt doesn’t disappear after death. In most cases, it’s either paid off through the estate’s assets or becomes the responsibility of a joint account holder or cosigner.
- If an estate can’t cover the debt, the remaining debt may impact beneficiaries and, in certain cases, they could be liable for paying it.
- There are critical steps to take after a credit card holder’s death, including organizing financial documentation, preventing further credit card use, notifying credit card companies and requesting a credit freeze from credit bureaus.
- What happens to card rewards accumulated by a deceased cardholder varies based on the issuer’s policies. Some allow rewards to be passed on to the deceased’s estate while others forfeit the rewards.
No one likes to think about end-of-life matters, let alone make specific plans or have difficult conversations with loved ones on the topic. But uncomfortable as the subject may be, preparing for what happens to your assets — and your debts — after your death is worth doing.
Often these conversations center on “who gets what” and traditional “reading of the will” plans. But your debts, including your credit card debt, are as much a part of what you leave behind as your assets.
What happens to credit card debt, specifically, after a cardholder dies depends on a number of factors, including how the account was set up and the status of the estate.
WHO IS RESPONSIBLE FOR A DECEASED PERSON’S DEBT?
FAQ
Do I have to pay my deceased mother’s credit card debt?
The estate is usually responsible for paying unsecured debt such as credit card and personal loan balances. Jul 24, 2024.
Does the executor have to pay credit card debt?
What Happens to Credit Card Debt? Credit card debt lives on after death and is usually paid off by the estate of the person who died. It is the executor’s responsibility to help pay off those debts where possible. Usually, the people who will benefit most from these payouts will be the ones who feel them the most.
Can debt collectors go after the family of deceased?
The general rule is that ALL debts die with the debtor. Creditors can only go after the estate, in the forms prescribed by the law, not after relatives, friends, or lovers.
Can I use the deceased person’s credit card to pay for the funeral?
Credit cards of the deceased are no longer valid. They cannot be used under any circumstances, even for funerals and final expenses. Transactions on these cards can result in fraud. Do not use the card to buy things, even if you are authorized to use it or had permission to use it before the cardholder died.