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While certain debts — like student loans — may be wiped clean when you die, credit card debt doesn’t simply disappear.
But that doesn’t necessarily mean your loved ones will be on the hook for paying off that debt. It can depend on a variety of factors, including exactly how you're related, how the account was set up, and even what state you live in.
Here's who has to pay when a person with credit card debt dies, as well as some potential steps you or your loved ones might need to take.
Who is responsible for a deceased person’s credit card debt?
When you die, you leave behind an estate, or net worth, which is the difference between your assets and liabilities. The executor of the estate — often named in a will, or else appointed by a court — will pay existing debts out of that estate, provided it's solvent.
But it gets a little more complicated if an estate doesn't have enough assets to pay off the debt. When it comes to credit card debt specifically:
Authorized users are not required to make credit card payments, whether the primary cardholder is alive or dead.
But living co-signers and joint account holders would have applied for the account with the decedent, so they would be responsible for the entire balance — regardless of who ran up that balance — if the decedent’s estate can’t cover it.
And in a community property state, credit card debt may be owed by a surviving spouse.
*Alaska, South Dakota and Tennessee allow spouses to opt-in to a community property arrangement if they choose.
If you're not sure whether you fall into any of these categories, you may need to consult an attorney. But in short, if you aren’t a co-signer or joint account holder, or a spouse living in a community property state, you aren’t legally required to pay a deceased person’s credit card debt. It becomes the responsibility of the estate.
» MORE:Authorized user vs. joint account holder
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If you're not responsible for the credit card debt
You don't need to do much, other than hand off the debt to the executor of the estate, who'll determine whether there's enough to cover it.
If there's not, the lender is usually out of luck and ends up writing it off. Lenders can appeal an executor's determination here, but in effect, the credit card debt is likely to die with the borrower.
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Of course, if you yourself are the executor, then you'll have plenty of other responsibilities to tend to — but they're largely administrative, not financial. An executor is not required to cover an estate's debts out of pocket.
If you are responsible for the credit card debt
You'll need to inform the credit card issuer of the account holder's death so that the account can be shut down and no further charges can be accrued. As proof, you'll likely need to submit a certified copy of the death certificate, along with any other documents the issuer may need in order to update records.
If you end up owing a large sum that you can't tackle immediately, you might consider looking into a balance transfer credit card, at least as a starting point. It can give you some interest-free breathing room as you determine the best way to pay off the debt.
» MORE:How to resolve finances after a death
What to do about harassment from creditors?
Even if the debt responsibility doesn't fall to you, it doesn’t mean you won't be hassled to make credit card payments on behalf of a deceased loved one. Lenders may try to collect from you if the estate doesn't — or can't — pay out.
But regardless of whether you're actually liable for the debt, you can stop creditors from harassing you about it. Per the Fair Debt Collection Practices Act, you can send a letter to creditors informing them that you don’t wish to be contacted again. (Make a copy of such letters for recordkeeping.)
The amount you owe on a credit card when you die is a type of unsecured debt. This means that if the estate can't pay the balance, the credit card company is out of luck. However, any joint account holders must settle unpaid bills as they are equally responsible for the loan.
Credit card debt doesn't follow you to the grave. Rather, after death, it lives on and is either paid off through estate assets or becomes the responsibility of a joint account holder or cosigner.
You are not responsible for your parents' debt. This is true regardless of whether you inherit assets under their estate. However, a parent's estate must settle any debts before you can inherit. And children often share financial responsibilities with aging parents, often medical and housing costs.
In general, you're not responsible for repaying the debts of a deceased spouse. But there are some exceptions — for example, you must continue paying any joint debts. And you could be responsible if you're listed as the executor of your deceased loved one's estate.
With a Trust, your executor has more control and can do their best to negotiate with creditors to (hopefully) reduce your debt. Credit card companies can still sue, but because there are such high upfront costs associated with filing a claim against a person who has died, creditors typically opt for a settlement.
Holders of credit card debt can make a claim against an estate for the debt, but they can't come after family members. Sometimes, they don't even take that step, simply writing off and canceling the debt to avoid the probate process.
A death notice flags a person's credit reports as "deceased - do not issue credit." If someone attempts to use the deceased person's information to apply for credit, the notice should be displayed when the deceased person's credit report is accessed, informing the creditor the person is deceased.
Credit cards of the deceased are no longer valid. They cannot be used under any circ*mstances, even for funerals and final expenses. Transactions on these cards can result in fraud. Even if you're an authorized user or had permission to use the card before the cardmember passed away, do not use them to make purchases.
It's possible to negotiate the credit card debt of a deceased person if you're legally responsible for paying the debt. That means you must be the executor or the administrator of the estate, a cosigner or joint account holder on the credit card, or a surviving spouse in a community property state.
If you live in a community property state, you probably will be responsible for debts accumulated by your spouse during the marriage. (These states are California, Texas, Arizona, New Mexico, Nevada, Washington, Idaho, Wisconsin, and Louisiana, while Alaska, South Dakota, and Tennessee make it optional.)
Upon your death, unsecured debts such as credit card debt, personal loans and medical debt are typically discharged or covered by the estate. They don't pass to surviving family members. Federal student loans and most Parent PLUS loans are also discharged upon the borrower's death.
Car Loans. A car loan is not forgiven on death. It becomes the responsibility of the estate and any co-signer. The estate can send a death certificate to the lender and pay off the full amount of the loan and pass the car along to the person designated to inherit it.
The tricky part of this process is how any outstanding debts that need to get paid will be settled. While the creditors can't claim the house itself, they can make claims in an amount that might require you to sell the house.
A common misconception is that any credit card debts are automatically written off. Instead, any individual debts must be paid using the money the deceased has left behind. Only if there isn't enough money in the estate may the debt be written off.
What types of debt can be discharged upon death? Upon your death, unsecured debts such as credit card debt, personal loans and medical debt are typically discharged or covered by the estate. They don't pass to surviving family members.
When the primary cardholder dies, credit card issuers usually close the account, often within a few weeks. Issuers normally find out about the death from the person settling the estate or from the Social Security Administration.
Once the lender is notified, it will close the credit card and provide a final bill to the estate within 30 days. While the estate is being settled, they can't impose additional late fees, annual fees, or over-limit fees. However, the interest on the debt continues to accrue.
Introduction: My name is Terrell Hackett, I am a gleaming, brainy, courageous, helpful, healthy, cooperative, graceful person who loves writing and wants to share my knowledge and understanding with you.
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