If Someone Dies What Happens To Their Debt – What happens to you after you die? No one knows for sure – but one thing is for sure: you won’t have to worry about paying your bills anymore. For those who survived, it was a different story. Will they be responsible for paying the credit card balance? In most cases, no. When you die, any credit card debt you have is paid off in full from your estate. Here’s what happens to credit card debt after death and what survivors should do to make sure it’s managed properly.
When you die, any debts you leave must be paid before any assets are distributed to your heirs or surviving spouse. The debt is paid out of your estate, which simply means the sum of all your assets at the time of your death. Your executor uses the assets of your home to pay off your debts. An executor can be someone you name in your will or, if you don’t have a will or assets, someone appointed by the probate court.
If Someone Dies What Happens To Their Debt
If you owe more than your assets, your assets will not be paid. Whether family members should pay off the credit card debt in this situation depends on many factors.
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Anyone with joint account balances on your credit cards could be held liable for the debt after your death. Joint account holders apply for credit cards as co-borrowers or co-borrowers. Credit card companies review applicants’ credit reports when deciding whether to grant credit. All account holders are responsible for paying the credit card balance.
Few major credit card companies offer joint accounts these days. If you shared a credit card account with your deceased spouse, one of you may have been an authorized user of the other account. (If you’re not sure which category you fall into, check with your credit card provider.)
As an authorized user, you receive a credit card in your name for the account and can make purchases and payments on the card. However, the first balance is responsible for paying the credit card balance. If you are an authorized user on the deceased person’s account, you usually do not need to maintain outstanding balances.
However, there is one key exception: community property states often cover spouses’ debts to each other. If you live in a community property, you may have to pay your spouse’s credit card debt after they die, even if you are the sole owner or the credit card is in their name only. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin are commonwealth states, and Alaska allows couples to form their own community. Laws can vary from one community property state to another, so if you live in one of these states, ask an attorney who specializes in state law in your state about what your obligations are.
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When a family member or loved one dies with current credit card debt, take these steps to make sure the debt is properly paid.
If you are the authorized user of the deceased’s credit card, do not make any payments on the card. If you do, the credit card company can legally argue that you are responsible for the entire balance. The missed payment will not be reflected on your credit report, only on the original cardholder. If you live in a community property state, ask an attorney to explain whether you should pay the bill.
If you find out that your spouse or family member has more credit card debt than they do, do you empty your bank account or give your spouse’s life insurance to the credit card companies to pay?
While debts like mortgages and car loans are secured by bonds, credit cards are unsecured loans that fall below the priority scale after death. If your estate does not have enough money to cover all of your debts, state law determines which creditors have priority. In most cases, unpaid debts are not paid.
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Credit card companies may contact survivors for information after a death, just as they would an executor of a deceased estate. However, they cannot legally ask you to pay credit card debt that is not your responsibility. If you are not sure what your obligations are, consult an attorney familiar with the state laws in your state.
Maintaining your credit card balance while you’re alive can ensure that your credit card debt isn’t passed on to your survivors after you die. If a spouse or other family member with whom you shared an account dies, keep an eye on your credit score to make sure it isn’t adversely affected as a result. Check your credit report and sign up for a free credit monitor to help improve and maintain a good credit score.
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Infographic: What Happens To Debt When You Die?
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