Laying Credit Card Debt to Rest: Who Pays the Price After Death?
Last Updated: July 10, 2017
Dealing with credit card companies is never a welcome experience, but particularly so regarding the debt of a deceased loved one. Yet, at a time when you need to mourn their death, and deal with other practical matters, credit card debt often rears its ugly head. The key to getting through it is to know the facts and communicate with the credit card companies accordingly.
Do Family Members Inherit Credit Card Debt After a Loved One's Death?
It depends, but generally speaking, no. Provided you are not a co-signer on the account, family members cannot be held responsible for credit card debt that a loved one leaves behind. However, in some community property states, debt passes on to spouses. So the rules may vary if you live in Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin.
Also, the indirect impact of leftover credit card debt can be costly. Provided there is an estate with assets, credit card companies will be paid before any inheritances are paid to named beneficiaries of the estate. In some cases, this means there is little if anything left after all debts are paid by the estate.
What if There Are Not Enough Assets in the Estate to Pay Off Outstanding Credit Card Debt?
In that case, credit card companies are out of luck. This is a common scenario, as credit card debt is unsecured debt, forcing it to play second fiddle to secured debts that must get paid off first, such as mortgages.
Am I Responsible For Debt on a Deceased's Credit Card For Which I Am An Authorized User?
No. After the death of the cardholder, authorized users on credit cards are not legally responsible for the debt. That said, you could be in trouble if you continue to use an authorized card after the cardholder's death. Or, if you use the authorized card knowing the debt will not be paid off.
Am I Responsible For Debt on a Deceased's Credit Card For Which I Co-Signed As a Joint Account Holder?
Yes. After the death of the joint cardholder, legal responsibility for the debt passes on to you, the co-signer on the account. This is yet one more very good reason to minimize your number of joint accounts. While acting as a co-signer for family or friends may help them qualify for credit they may otherwise not receive, be mindful of how their spending and subsequent payment habits could end up hurting your credit in the long run. A joint cardholder could maintain good standing on the account simply by making the minimum payment each month. But they could simultaneously maintain a balance of thousands of dollars for which you will be fully responsible for at their death.
Am I Responsible For Debt on a Credit Card Left Behind by my Ex-Spouse?
It depends. If you were a joint account holder on a credit card, and the divorce settlement included their agreement to pay off the balance on that credit card, let's hope they followed through. Otherwise, if that spouse dies before the credit card is paid off, then you are legally responsible for the debt.
After the Cardholder's Death, Can Credit Card Companies go After IRA's, 401(k)'s, Brokerage Accounts or Insurance?
No, as these are generally not considered part of the cardholder's estate. Instead, they should go to whomever the deceased named as the beneficiary. That said, it is possible the credit card companies could go after said beneficiary. That should not be the case for 401(k)'s and insurance policies, but beneficiaries of IRA's and brokerage accounts could be affect depending on the rules of the state.
Should I Contact the Credit Card Companies After a Loved One's Death?
Yes. You may be able to avoid future hassle and confusion by notifying credit card companies of your loved one's death. Granted, there are a number of difficult emotions to deal with and practical matters to take care of, so this may not be the priority at the top of the list. But it should be something that is addressed sooner than later, before payments are missed and fees accumulated on debts that may come out of the estate.
Can Credit Card Companies Continue to Allow Fees and Finance Charges to Accumulate on Credit Card Accounts While the Estate is Being Settled?
No. That is one more reason why it is important to notify credit card companies of your loved one's death.
How do I Handle Collection Calls from Credit Card Debt Collectors After a Loved One's Death?
If and when you start receiving calls regarding collection of the deceased's credit card debt, first ask for proof of the debt. Once you have received this validation, determine whether the creditor is still within its statute of limitations to collect on the debt (which varies by state). Finally, determine whether you, or anyone else, is legally responsible for the debt. If you are not responsible for the debt, but the creditor continues to hound you, you may file a complaint with your state Attorney General's office and the Federal Trade Commission. You may also consider consulting an attorney.