When a loved one passes away, the last thing you’ll want to do is deal with his or her finances. Unfortunately, these things have to be attended to, even in a time of grief. Here’s what you need to know about what happens with debt when someone dies and what you can do to resolve any debt issues.
Does debt die with the borrower?
While certain debts — like student loans — are wiped clean when the borrower dies, credit card debt doesn’t simply disappear. However, that doesn’t necessarily mean anyone else has to pay it off. Confused yet? Let’s discuss who has to pay when an indebted person passes away.
Who has to pay a deceased person’s credit card debt?
When someone dies, he leaves behind an estate, or net worth, which is the difference between his assets and liabilities. His existing debts will be fully paid out of this estate — provided it’s solvent — then any remainder of the estate will be distributed to the beneficiaries. However, it gets a little more complicated if the deceased doesn’t have enough assets to pay off the debt.
Authorized users aren’t required — or expected — to make credit card payments, whether the primary cardholder is alive. But joint account holders equally own an account, so the living cardholder would be responsible for the entire balance, regardless of who ran up the balance if the decedent’s estate can’t cover it. In addition, a surviving wife may owe her deceased husband’s debts, if they lived in a community property state, for example.
If you aren’t a 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. This doesn’t mean you won’t be hassled to do so. Lenders may try to collect from you if the estate doesn’t pay out, but it isn’t your problem unless you fit one of the classifications above. The credit card companies will be out of luck.
What do I do with my loved one’s credit cards?
Make sure the lenders are aware of the death, so accounts can be shut down immediately and no further charges can be accrued. You may have to send a copy of the death certificate as proof. The executor of the estate can pay off the debts with available assets from the estate. If the assets don’t cover the debts, the executor should then inform the decedent's creditors so the amounts can be written off. Credit cards can either be destroyed or sent back to the issuer to be destroyed.
I’m being hassled by creditors — what should I do?
Whether you’re obligated to pay off a deceased person’s debt or not, you can stop creditors from harassing you about it. Send a letter informing the creditor that you don’t wish to be contacted again and make a copy of it for your records. If the calls continue, report the misbehavior to your state Attorney General’s office or the Federal Trade Commission. It’s illegal for creditors to call you after you’ve specifically requested that they stop.
Bottom line: While credit card debt doesn’t die with the borrower, it usually isn’t absorbed by the decedent’s loved ones. Exceptions to this include joint account holders and spouses who live in community property states. After the debt is paid out of the estate, the credit card companies should write off any existing debt and the cards should be destroyed. If you or another relative is being harassed for collection of the debt by creditors, send a letter requesting they stop and report them if they continue to call.