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What Happens to a Credit Card Debt When Person Dies?

22 April 2011 by CreditCardsCo™


There are credit card holders across the world with the number in billions. So what happens when a person dies and leaves a lot of credit card debt behind? Death and credit card debt go hand in hand, in the sense that most credit card debts are written up as lost when the credit cardholder dies.

But there are a few exceptions to this rule. Unsecured debt is not legally binding to the family left behind -- although in some cases, the spouse of the late credit cardholder may be held responsible for the debt. This can happen if the credit card account is a joint account held between the couple.

Making Payments After Death

Usually a credit cardholder's account is in his or her name only. If such is the case, the debts are paid off by dissolving the deceased person's estate. While it is possible for credit card companies to collect the debt from the sale of assets and the estate, there are certain ground rules that they have to follow.

After a person dies, the credit card debt can be paid off by the executor of the will of the deceased individual. What this means is that the deceased person's estate is usually liquidated and the assets are sold to repay any financial debts owed. The priority among the debts being the secured debts like mortgage and car payments. Unsecured debt like credit card debts gets paid after the secured debts have been paid off.

If there are any assets left after that, they are divided among the beneficiaries according to the will or state law. Credit card debt and death are among the things that most beneficiaries worry about, especially if there is a lot of unsecured debt remaining.

How Credit Card Companies Can Claim Debt After Death

If the credit card account is a joint account, the individual who shares the account will be held responsible for the debt legally. However if the partner is only an authorized user of the account, they are not bound to repay the debt owed to the credit card companies. Generally, the card companies will employ all sorts of tactics to get the credit card debt repaid after death. However, they cannot force family members to pay the debt.

Some states employ the "Community Property Laws." According to these laws any wealth that is accumulated after marriage is treated as joint. The same applies to debt accumulated after marriage. The states that employ the community property laws are Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In these states when a person dies, the credit card debt is to be paid off by the spouse.

Handling The Accounts After Death

It is up to the executor of the deceased person's will to notify the creditors about the deceased's estate and the death. The executor will usually send a certified copy of the death certificate to each of the creditors. Any inquiries from the creditors to the family regarding the debt must be forwarded to the executor of the estate. It is possible that some credit card companies may offer to let a family member take over an account if that member can assume the repayment of the debts and go through a credit check.

If the credit of the member is not as good as that of the deceased's, then the family member may not inherit the low interest rates and other benefits that the credit cardholder originally enjoyed. In such a situation, it is advisable to simply close the credit card account that is in the name of the deceased. When the person dies, the credit card debt will most likely be written off by the company.

Some Things To Remember

The deceased credit card debts cannot be inherited by the members of the family. In fact, because credit card debt is unsecured it will most likely be "charged off due to death" when the death certificate is provided to the creditors. So when a person dies, credit card debt dies along with them if he or she is the sole account holder. It is important to keep in mind that any debt inquiries must be redirected to the executor of the estate.

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