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Can You Inherit Credit Card Debt?

Dec. 22, 2014
Credit Cards
Can You Inherit Credit Card Debt?
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Maybe Papa was a rolling stone and Mama was a big spender. And if they racked up a significant amount of credit card debt through the years, you might be concerned about how their rock star lifestyles will affect you once their gone.

It’s not disrespectful or even distasteful to worry about your parents’ debt, whether they are living or passed on. It’s part of being a financially responsible adult.

Fortunately, even if your parents maxed out multiple cards, it’s highly unlikely you’ll have to pay off their credit card debt in the event of their death.

Credit cards are ‘unsecured’ debt

Secured debts (like mortgages and auto loans) are tied to collateral or property the bank can take if the borrower fails to pay off the balance. But credit cards are considered unsecured debt. This means lenders don’t have a right to seize property for unpaid credit card balances in the event of death or otherwise.

In the event of a borrower or cardholder’s death, creditors can make attempts to collect on the debt, but those attempts can only go so far. They know they are taking a risk with each credit card they issue, and not being paid when a cardholder dies is just one of those risks.

How credit card debts are paid in the event of death

When someone dies with unpaid credit card balances, money from the estate will likely be directed to the debt. This means any savings your parents have could be used to pay off the balance.

In the case of inheritances, the money to pay unsecured debts will be taken out before you (or other beneficiaries) receive what’s left over.

If there is no inheritance or not enough money in the estate to cover the debt, the bank will write off the balance as a loss. In other words, they will accept that the debt will go unpaid and cease collection efforts.


Of course, there are exceptions to this. If you co-signed on a credit card or are a joint account holder with your parent, you will be responsible for the remaining balance. Likewise, if your parent made purchases on your account as an authorized user, the debt will be your responsibility.

In these cases, transferring potentially high balances onto a balance transfer credit card could help you pay off the debt with less stress and less money being directed toward interest.

Image via iStock.