Before any assets are handed to your heirs or surviving spouse, any debt you leave behind must be settled. Debts are paid from your estate, which is the total of all of your assets at the time of your death. Your estate’s assets are used by the executor to pay off your outstanding debts. The executor may be someone you named in your will or estate plan, or someone appointed by probate court if you don’t have a will or estate plan.
Your estate is insolvent if you have more obligations than assets. Whether your credit card debt must be paid by family members in this circumstance is determined by a number of variables.
After you die, anyone who is a joint account holder on your credit cards may be held liable for the debt. Joint account holders apply for credit cards as cosigners or co-borrowers, and the credit card provider looks at both applicants’ credit reports before choosing whether or not to extend credit. The credit card amount must be paid in full by both account holders.
These days, just a few big credit card firms provide joint accounts. If you and your deceased spouse shared a credit card account, it’s more than probable that one of you is an authorized user on the other’s account. (If you’re not sure which group you fall into, call your credit card company.)
You obtain a credit card in your name for the account as an authorized user, and you can use it to make purchases and payments. The principal account holder, on the other hand, is ultimately responsible for the credit card amount. If you’re an authorized user on a deceased person’s account, you’re normally not compelled to pay the outstanding sum.
However, there is one important exception: community property states often make spouses liable for each other’s obligations. Even if you were only an authorized user or the credit card was completely in their name, if you live in a community property state, you may be obligated to pay your spouse’s credit card obligations after their death. Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, while Alaska allows spouses to declare their property community. Because laws differ from one community property state to the next, if you live in one of these states, find out what your responsibilities are by consulting an attorney who specializes in estate law in your state.
How do I deal with a deceased person’s credit card debt?
You’ll almost certainly need multiple official copies of this document to deliver to credit card companies, life insurance companies, and other estate-related entities. While the funeral director in charge of your loved one’s burial or cremation can assist you in obtaining copies of the death certificate, bear in mind that these official documents have a per-copy fee, which varies by state and even county.
Prevent further credit card use
When a person passes away, his or her credit cards become invalid. Even for appropriate expenses of the deceased, such as a funeral or final expenses, you should never use or allow anyone else to utilize them.
The most common method people inadvertently commit credit card fraud is by continuing to use a credit card as an authorized user after the cardholder has died, and it might land you in serious trouble. Estate lawyers advise gathering any credit cards, including any authorized user cards, from anyone who may have them and storing them safely or destroying them.
Notify credit card companies of the death
After the primary cardholder passes away, all credit card accounts should be cancelled immediately to avoid interest and financing costs. Notify the credit card company that a joint cardholder has died if you have a joint credit card.
Check each credit card account to see if any recurring charges have been set up. If there are any regular transactions on the account, such as a phone bill or a utility payment that is automatically charged each month, you must cancel them or move them to another card as soon as possible.
Use certified mail to contact each credit card company, and keep your receipt. You can speak with a representative about the matter by calling the number on the back of the card; they can flag the account and provide the address where you’ll need to mail the relevant papers. If you didn’t include an official copy of the death certificate in your initial letter, each card issuer will request one once they receive it.
Request a credit freeze from all three credit bureaus
In addition to contacting all of the deceased’s credit card companies, you’ll need to contact all three credit reporting agencies—Experian, Equifax, and TransUnion—to request a credit freeze, which will prevent anyone from opening new credit cards or other accounts using the deceased’s name and Social Security number.
It’s also crucial to follow up by mail, requesting that the credit report be marked as “Deceased” very away. “Do not extend credit.”
Know your rights before paying debt collectors
Before you start distributing money, you may need to wait a certain amount of time for bills to arrive and publish a public notice of death in the newspaper, depending on state legislation.
When dealing with debt collectors, it’s critical to understand your rights. Remember that the federal Fair Debt Collection Techniques Act (FDCPA) protects you by making it illegal for debt collectors to utilize abusive, unfair, or misleading debt collection practices. Individual creditors should not be allowed to leap ahead in line and be paid first, especially if there is a danger that there will be insufficient funds to go around.
According to John Caleb Tabler of Lau & Associates in Pennsylvania, before you pay anything, you should ask the credit card company to provide a proof of claim for the estate. You can submit this request at the same time as your written notification to the credit card company, or later.
Some debt collectors are ruthless, preying on the survivor’s emotions in an attempt to persuade them to pay a bill they may not owe. If you’re negotiating with a debt collector over the phone, never admit or agree to anything, especially a payment schedule.
If you need assistance deciding the sequence in which debts must be paid in your state, or if you require general legal counsel while managing the deceased’s final desires, you should consult an estate attorney.
Do I have to pay my deceased husband’s credit card debt?
The majority of the time, the answer to this question is no. In most cases, family members, including spouses, are not liable for their deceased relatives’ debts. Credit card debts, student loans, vehicle loans, mortgages, and company loans are all included.
Rather, any outstanding debts would be paid from the estate of the deceased person. As a surviving spouse, this means you won’t be responsible for paying anything toward the loan individually. Your spouse’s assets, on the other hand, could be used to pay off loans or other debts they’ve left behind.
Following your spouse’s death, a debt collector may contact you to confirm who they should contact about debt recovery. The executor of the estate is usually the person in charge of this. If your spouse had a will, it’s possible that they named an executor in it. If they don’t want you to be their executor, you can file a petition with the probate court.
Inventorying the deceased person’s assets, estimating their value, notifying creditors of their death, and paying any outstanding bills are all important aspects of the executor’s job. When there are no cash resources available, such as a bank account, the executor can liquidate assets to pay creditors.
What happens when a credit card holder dies?
If you become behind on your payments, the bank will send you many reminders and call you. If the balance on the credit card is extremely high, the bank will take proper action to reclaim the amount.
Small sums may be overlooked by banks. But, in the end, failing to honor your pledge will result in a low credit score. As a result, it is preferable to pay on time.
There have been various cases in which a family member has died and the person who has passed away has left some credit card balances unpaid.
The legal heir now bears the burden of payment in the event of the cardholder’s death. As a result, if a property has been inherited, the legal heir is responsible for paying the balance due on the credit card, including interest and any other charges that may apply.
Of course, you can go to the bank and try to work things out, or you can file a complaint with the banking ombudsman if you’re being harassed.
The bank or financial institution in question must launch a civil claim for recovery, and the cardholder’s legal representative must then make good on the payment from the deceased person’s property.
Is credit card debt forgiven upon death?
Who is accountable for credit card debt after death, and what is forgiven? After someone passes away, their estate is responsible for paying off any outstanding bills, including credit card charges. After a death, relatives are usually not liable for paying off credit card debt with their own money.
Do credit card companies know when someone dies?
A deceased alert is a notification that a person has died to credit card companies, credit rating agencies, and other financial organizations.
Credit Cards That Are In Your Name Only
In most common law states, you’re only responsible for credit card debt if it’s in your name. As a result, if the credit card is just in your spouse’s name, you are usually not responsible for the debt. Keep in mind, however, that if you have jointly owned assets, the credit card company can still pursue your spouse’s share of those assets.
Who pays if credit card holder dies?
Survivors are not party to debt card holder to credit card debts unless there are joint card holders. Your heirs can inherit other things, but they can’t inherit your credit card debt. This does not, however, preclude you from receiving calls from creditors seeking money.
What happens to my husband’s credit card debt when he died?
When your spouse passes away, their debt is left behind, but that doesn’t mean you have to pay it. A deceased person’s debt is paid from their estate, which is essentially the sum of all of their assets at the time of their death. If your spouse has a will, the executor specified in the will is in charge of paying creditors from the estate. If your spouse died without leaving a will, a probate court judge will decide how their assets should be distributed and appoint an administrator to carry out those decisions.
In general, you are not liable for your spouse’s debts unless you had a joint credit account (which is different from being an authorized user on your spouse’s account); cosigned for a loan, debt, or account; or resided in one of the nine community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin). (Alaska residents have the option of signing a special agreement to pick common property.)
In most places, spouses are jointly and severally liable for each other’s debts. However, rules range from one state to the next when it comes to community property. Consult an attorney versed with estate law in your state if you’re not sure what the law needs.
If you signed or cosigned hospital admission documents or medical treatment authorizations, you could be liable for any medical bills your spouse has that their insurance does not cover. This is determined by the laws of your state and the paperwork you signed.
Will you be required to hand over the proceeds of your spouse’s life insurance policy or access their retirement account to pay the bills if their assets at the time of their death don’t cover their debts? Certain assets, such as life insurance policies, retirement plans, brokerage accounts, and assets maintained in a living trust, are safeguarded from creditors and cannot be used to settle debts after a spouse passes away. Otherwise, the estate executor or probate administrator will prioritize creditors and disburse payments according to your state’s probate regulations until the money runs out. Some creditors will not be paid if there is not enough money to pay all of the bills.
Can credit card companies take your house after death?
Almost three out of every four people die in debt. Will your credit card bills be passed down to your family members? Credit card bills, however, do not vanish when you die. Your estate, which consists of everything you own — your car, home, bank accounts, and investments, to mention a few – uses these assets to pay off your debts.
Does debt pass to next of kin?
Unpaid debts do not simply vanish when someone passes away. It becomes a part of their personal property. Except when they own the loan, family members and next of kin will not inherit any of the outstanding debt. As a result, they can be a crucial component of estate planning.
Does your debt go away after 7 years?
After 7 years, unpaid credit card debt will be removed off a person’s credit report, meaning late payments linked with the unpaid debt will no longer harm the person’s credit score. Unpaid credit card debt, on the other hand, is not forgiven after seven years. You could still be sued for unpaid credit card debt after 7 years, and depending on your state’s statute of limitations, you may or may not be able to use the debt’s age as a defense. It lasts between three and ten years in most states. A creditor can continue sue after that, but if you specify that the debt is time-barred, the lawsuit will be dismissed.
- A company has the right to sue you for unpaid debt as long as the statute of limitations period is open, and you won’t be able to claim the age of the debt as a viable defense. If the debt collector prevails in court, the judgment will remain on your credit report for seven years after it is filed. Debt can be collected after the litigation by wage garnishment and the (forced) sale of your possessions. Interest will continue to accrue until the debt is paid, depending on the state. It is also technically feasible to be sentenced to prison for failing to pay your debt. While you cannot be imprisoned for not paying a civil obligation (including credit card debt), you can be imprisoned for failing to pay a civil fine imposed by your creditor when you are taken to court.
- Negative credit report impact: If you miss a credit card payment by 30 days or more, the late payment will be recorded to the credit bureaus and will remain on your credit report for 7 years. Similarly, if you are 120 days or more late on your payments, the lender will write off the loan. This is referred to as a “charge-off,” and the credit card account will be marked as “Not Paid as Agreed” as a result. Charge-offs will also remain on your credit report for seven years.
- With time, the damage to your credit score will lessen: Late payments and charge-offs have a negative influence on your credit score when they appear on your credit report. The severity of their impact on your credit score is determined on your overall credit health. One late payment can lower your score by as much as 80–100 points. You should expect your credit score to decline by as much as 110 points if a charge-off appears on your credit report; the majority of this drop is due to late payments.
After seven years, you are still liable for outstanding credit card debt. If you’re still inside your state’s statute of limitations, instead of risking being sued, you could opt to deal with debt collectors to settle the debt. If you do so, you incur the danger of resetting the statute of limitations, so think about your alternatives carefully. You may be able to pay less than what you owe or work out a payment plan if you contact your creditor. If the debt collector wins a case against you, your wages may be garnished or your possessions may be forced to be sold. In this guide on How to Pay Off Credit Card Debt, you’ll find some helpful hints.
Who’s responsible for a deceased person’s debts?
In most cases, a person’s debts do not disappear when they pass away. Those debts are owed by and paid from the estate of the deceased person. Family members are usually not required by law to settle a deceased relative’s debts with their own money. If the estate doesn’t have enough money to cover the debt, it usually goes unpaid. There are, however, exceptions to this rule. If you do any of the following, you may be personally liable for the debt:
- are the spouse of the deceased person and live in a community property state like California
- are the surviving spouse of a deceased individual, and live in a state that mandates you to pay certain types of debt, such as some healthcare costs
- were legally liable for the estate’s resolution and failed to observe certain state probate regulations
Consult a lawyer if you’re unsure whether you’re legally obligated to pay a deceased person’s debts with your own money. You may be eligible for free legal assistance from a legal aid agency near you, depending on your income.
Who can pay debts out of the deceased person’s assets?
The executor is responsible for paying the deceased person’s debts. The executor is the person named in a will to carry out the terms of the will following the individual’s death.
If there is no will, the court may appoint an administrator, personal representative, or universal successor to the estate and grant them authority to settle the estate’s issues. In some states, that authority might be delegated to someone not chosen by the court. State law, for example, may set a different method for someone to become the executor of the estate even if the court hasn’t formally appointed them.
Can a debt collector talk to a relative about a deceased person’s debt?
The law protects persons, especially family members, against debt collectors who engage in abusive, unfair, or deceptive debt collection activities.
Collectors can contact the deceased person’s family and discuss outstanding debts under the Fair Debt Collection Practices Act (FDCPA).
- If the deceased was a minor child (under the age of 18), the parent(s) must be notified.
Collectors can also approach anyone with the authority to pay debts with assets from the estate of a deceased person. Debt collectors are prohibited from discussing a deceased person’s debts with anybody else.
If a debt collector contacts a deceased person’s relative, or another person connected to the deceased, what can they talk about?
Collectors can get the name, address, and phone number of the deceased person’s spouse, executor, administrator, or other person with the power to pay the deceased person’s debts by contacting other relatives or people connected to the deceased (who don’t have the power to pay debts from the estate). Collectors can normally only contact these relatives or others once to obtain this information, and they are not allowed to discuss the debt facts.
Collectors can contact the relative or other person again for updated information, or if the relative or other person provided incorrect or incomplete information to the collector. Even then, collectors are prohibited from discussing the debt.
If I have the power to pay a deceased person’s debt, can I stop a debt collector from contacting me about the debt?
Yes, you have the legal right to stop a collection agency from contacting you. Send a letter to the collector to accomplish this. A simple phone call is insufficient. Tell the collector that you don’t want to hear from them again. Make a copy of the letter for your records, then send the original by certified mail with a “return receipt” to prove that the collector received it.
However, even if you cease talking with collectors, the debt will not go away. The debt collectors may still try to collect the debt from the estate or anyone who falls into one of the above categories.
