Credit card debt is a burden in many people’s lives. Unfortunately, that financial stress can follow you even when you die. Your loved ones and spouse may be affected by your leftover debt as well. Staying on top of your finances and tying up any loose ends when you are near the end of your life will make the process of your death much easier on those you leave behind.
It is important to know what will become of your estate after you pass and how you can manage your finances to better benefit your heirs. If you are currently dealing with the financial affairs of a deceased loved one, it is important you understand the legal processes behind debt collection and what your rights are. By arming yourself with the right knowledge, you can better navigate the stressful financial situation you may have been dealt.
Who Is Responsible For Paying Off Credit Card Debt When You Die?
When you die, any debt you have incurred will be taken out of your estate before being given to your surviving family members. Your estate includes personal property as well as your personal finances, stock portfolios, etc. If you have more debt than you have leftover assets, then your debt will become insolvent.
Your spouse or family members will not be required to pay off your credit card debt unless they are a joint account holder. A joint account holder is someone who has equal responsibility for the credit card account.
Joint account holders apply for a credit card together and both sign as co-borrowers with the credit card company. They are both equally responsible for paying off the credit debt on time.
However, most major credit card companies don’t offer joint accounts. Most couples who share a credit card account make each other an authorized user. This means one spouse is the owner of the account while the other is an authorized user who gets their own credit card to make their own purchases.
The account owner is the person solely responsible for paying it off. This means that the authorized user is not liable for their spouse's debt after they die, even if they made charges on the account while their spouse was alive.
COMMUNITY PROPERTY STATES
One exception to credit card debt liability is if you live in a community property state. Community property refers to any assets that spouses acquire during their marriage other than gift or inheritance. This means that spouses are also responsible for each other's debt before and after death.
Not all states recognize community property, but if you live in California, Idaho, Nevada, Arizona, New Mexico, Louisiana, Washington, Wisconsin, or Texas you and your spouse share community property.
The laws for community property are different state by state, so if you live in a community property state you should consult an attorney to find out what exactly your responsibilities are.
What Do You Do When A Primary Card Holder Dies?
It can be a scramble finalizing and tying up loose ends when a loved one dies, especially if their death comes unexpectedly. Finances are just one more added stress to the mix. But it is important you know what to do in such situations to avoid any unnecessary problems. Below are the following steps you should take immediately after a loved one dies leaving behind their credit debt:
STEP 1: ORGANIZE YOUR LOVED ONE'S FINANCES
Create a list of all of their credit accounts and find out the details for each one. Is there a joint account holder or authorized user? How much debt did they owe?
If you’re not sure what credit accounts the deceased had, the spouse or executor of their estate can request a copy of their credit report to find out. It’s important to figure out just how much they owe and to whom before their assets are distributed among their surviving heirs.
STEP 2: STOP USING THEIR CREDIT CARDS
If there was an authorized user for any of their accounts, notify that person immediately to stop using the card. Any transactions made after the primary account holder dies is considered fraud and can be punishable by law.
Married couples should consider each person having their own credit account for this reason. This way, the surviving spouse still has a credit card to use after their spouse has died.
STEP 3: REPORT THEIR DEATH TO THE CREDIT CARD COMPANIES
Contact each of the deceased’s credit accounts to notify them of their death. If they were the sole account holders, ask to close the account. If you or someone else was a joint account holder, you can either ask to close the account or transfer it to the joint account holder’s name.
But be aware that the credit card agreement terms may change. It’s best to close the deceased credit accounts as soon as possible to avoid fraudulent charges and identity theft.
STEP 4: NOTIFY CONSUMER CREDIT BUREAUS
If you don’t want to wait for the credit card companies to report your loved one’s death to the credit bureaus, you can do it yourself. This will help to reduce the risk of identity fraud from scammers opening credit accounts in the deceased’s name.
You’ll need to contact the three major credit bureaus (Experian, Equifax, and TransUnion) and provide them with a death certificate and your loved one’s social security number. You will also be required to show proof that you are authorized to act on the deceased’s behalf.
If you are the remaining spouse, you are automatically authorized, otherwise you will need to be able to prove you are the executor of the estate.
STEP 5: MAKE PAYMENTS ON JOINT ACCOUNTS
Be sure to continue making payments on any joint accounts. Just one late payment can affect your credit score if you are the joint account holder.
Contact the credit card company and talk about your options for payment. Even one small monthly payment will prevent your score from dropping if you can’t pay the debt in full.
What Are Some Helpful Things To Know About Credit Card Debt & Death?
Financial issues can be tricky. It’s best to consult an expert in estate law if you are unsure of how to proceed with taking care of the deceased’s leftover debt. There are a few things you should be aware of immediately following the credit account holder’s death:
STOP MAKING PAYMENTS ON THEIR CARD
Make sure you don’t make any payments on the deceased’s card if you are an authorized account user. The credit card company may be able to claim that you have taken responsibility for the account and now be required to pay the balance yourself. As an authorized user, a missed payment on the card will not reflect on your credit report. Only the primary account holder’s credit will be affected, which in this case is the deceased.
SPOUSES ARE RESPONSIBLE FOR SOME DEBT
Some states may require the surviving spouse to pay off debt associated with healthcare. Regardless of whether the medical bills were in your spouse’s name, you will be required by law to cover them if you were married to the deceased.
This is even true in the case of couples who are separated. And if you sign for the debt, you can be sued for it. There is not much you can do about this besides negotiate a settlement or agree on a payment plan to settle it over time. It’s best to deal with this debt right away to avoid destroying your own credit.
You may also be responsible for your spouse’s debts if you and your partner were joint business owners. If you and your spouse started a business together or you cosigned or acted as a guarantor on a business loan, any remaining debt now falls to you.
However, if your spouse was the sole owner of the business and none of the legal documents are in your name, you are usually not obligated to pay back the debt. The exception would be if you live in a community property law state. In that case, any debt belonging to your spouse now falls to you.
CREDITORS HAVE A TIME FRAME TO CLAIM PAYMENT
All states will require the executor of the deceased’s estate to post notice of death either in a newspaper or directly to creditors. Upon notice of death, creditors have a select time frame to file a written claim for payment from the estate. This time frame varies from state to state, but is usually within 3 to 6 months.
However, some states have longer time frames that could prolong the probate process up until a year. Once this time frame has passed, creditors can no longer reach out to the estate for payment. If creditors do continue to pursue payment, they can be held legally accountable for inappropriate business practices.
What Assets Are Protected From Creditors?
As stated earlier, a deceased person’s debts will be taken from their estate before the remaining assets are distributed to their spouse or heirs. If a deceased person’s debts can not be paid off from their estate, then their estate will be considered insolvent. Credit cards are considered unsecured loans, which means they are bottom on the priority list after a person’s death.
State law decides which creditors will be paid first from the estate. If there is not enough to pay them all, then the creditors of lower priority simply don’t get paid. But what is considered part of your estate? Are there any assets that creditors can’t go after to pay off your debts?
ASSETS SUBJECT TO PROBATE
Some of your assets are subject to probate after you die. Probate is the judicial process by which the court will assign an executor to transfer assets according to the deceased’s will. During this time, they will also pay off any debts the deceased may have owed.
Your estate includes all your assets that you own at time of death. This includes your personal bank account, personal property (boats, planes, and in some cases artwork and memorabilia), real estate, stocks, and bonds.
ASSETS NOT SUBJECT TO PROBATE
There are certain assets, however, that creditors cannot claim during probate. This means these assets will pass directly to the deceased’s heirs or beneficiaries without being subject to the probate process.
These assets include:
- Life Insurance proceeds
- Retirement accounts, including 401 (k) and Roth IRA accounts
- Brokerage accounts
- Assets in a living trust
- The deceased’s home (depending on the state and the property title specifics)
Credit card companies may contact the deceased’s family for contact info for the estate’s executor, but they cannot legally ask you to pay off your deceased loved one’s debt that does not belong to you. If creditors do continue to harass you, there are steps you can take to legally get them to stop. Remember, any debt not in your name is not your responsibility.
How Do You Prepare Your Finances Ahead Of Time?
Credit card debt and death bring with it added stress for surviving family members. No one wants to cause their family unnecessary worry, especially after death. To avoid leaving your family with responsibility of credit card debt after death, plan ahead now to make it easier on them.
The first step is to manage your finances now and pay off any debt you can while you are still living. Next, be sure to set up your finances so that they will be protected from creditors when you die.
NAME YOUR BENEFICIARIES
Life insurance, retirement accounts, brokerage accounts, and trusts will only bypass probate if they have a beneficiary named. A beneficiary is someone you legally name as the inheritor of your assets after you die.
You will need to do this while living, however, by formally contacting the institution you wish to name a beneficiary for. A beneficiary will then legally be able to inherit your assets without them being subject to creditors.
Be sure to name secondary beneficiaries just in case your first beneficiary is no longer living when you pass on. If you do not have a second beneficiary, then the assets will automatically be included in your estate and used to pay off any debts.
PURCHASE LIFE INSURANCE
If you want to ensure that your family will be left behind with something after you die, consider purchasing life insurance. Life insurance goes directly to your surviving heirs and in most states is fully protected from debtors.
Life insurance could be the only inheritance your family receives if your estate is sold off completely to cover your debts. Most life insurance companies process claims quickly to make cash available for funeral expenses and such.
How much money your family receives from life insurance will depend on the plan you pay into while you are living. Leaving your heirs with any amount of money is better than nothing. Just making even small life insurance payments each month will be beneficial to your family in the end.
SPECIFY IN YOUR WILL WHO WILL BE PAID FIRST
Your debts will be paid off from your estate before the remainder is given to your family. However, you can set the order in which your debts are paid by specifying them in your will.
You can ask that certain assets be liquidated before others and vice versa. You can also keep certain assets out of probate altogether by distributing them directly to an heir. For example, if you want your daughter to receive your precious jewelry collection, the jewelry will be given to your daughter directly and exempt from probate.
Keep in mind that if your remaining estate does not cover your debt, then your daughter may still have to liquidate her inheritance or pay your debt out of pocket to keep it.
What Do You Do If You Are Being Hassled By The Deceased's Creditors?
Creditors know that family members of the deceased are not liable to pay their debts, but that won’t stop them from trying. It’s common for debt collectors to harass and mercilessly hassle those connected to the deceased for payment. They are known to say just about anything to convince someone to pay up.
Debt collectors are legally not allowed to incessantly call and harass you for payment. If you are dealing with creditors who are especially aggressive, there are actions you can take to make them stop.
SEND A CEASE & DESIST LETTER
Contact your lawyer about sending a cease-and-desist letter to the creditors who are harassing you. A cease-and-desist letter is a formal way to request that the debtors stop contacting you. Under the Fair Debt Collections Practices Act, creditors are not allowed to contact relatives and friends regarding someone’s debt if they have formally been asked not to.
Make sure to keep a copy of the letter for yourself and consider sending the letter by certified mail so that you can get a receipt ensuring the debt collectors received your letter.
There is little debtors can do to further harass you unless they decide to take you to court. This of course would only be applicable if the debt owed is in any way your responsibility (as in the few scenarios mentioned earlier in this article).
If you are the executor of the deceased’s estate, you are legally obligated to pay debts out of the estate. You are not however required to pay any of the debt from your own pocket.
REPORT DEBTORS FOR INAPPROPRIATE ACTIONS
Legally, debt collectors are not allowed to harass you using abusive or inappropriate language. They are not allowed to threaten or intimidate you or lie to you, claiming they are someone they are not or threatening to send you to jail.
If you experience this with any debt collector from a credit agency, you can report them to your state attorney general's office, the Federal Trade Commission, or the Consumer Financial Protection Bureau. Debt collection laws vary from state to state.
Contacting your state attorney general’s office will help you understand the laws in your state and what rights you have. The Federal Trade Commission and the Consumer Financial Protection Bureau will help investigate and bring a case against the debt collectors if they have broken the law. These agencies operate to protect the consumer against fraud and bad business practices.
How Can You Use Their Credit Card To Preserve A Loved One's Memory?
Saying goodbye to your loved one is hard enough without having to deal with added stress of handling their credit debt. Settling their estate inevitably means going through their belongings and deciding what to keep and what to discard. It is hard to think of discarding any of the belongings that they once touched or used on a daily basis.
Credit cards and bank cards are no different. It is a solemn reminder of their normal activities while they were alive. How many times during the day did they pull out their card to make a purchase? The weathered piece of plastic with their name on it can be surprisingly sentimental.
Keeping your loved one’s credit or bank cards can serve as a way to keep a part of them close to you at all times. They are small tokens of remembrance that will likely hold meaning only to you.
You can use your loved one’s credit or bank cards to create keepsake items and even keepsake jewelry. Below are some ideas for turning your loved one’s cards into beautiful memorials:
PHOTO ENGRAVED JEWELRY
Some credit or bank cards might have a picture of your deceased loved one on the back. You can use this photo to create a beautiful photo engraved jewelry keepsake for remembrance. You can do the same with photo engraved keychains or money clips.
If their cards do not have a picture on them, you can use their signature on the card instead. A keepsake engraved with their signature will add an even more personal touch to your keepsake jewelry.
MAKE THE CARD INTO A GUITAR PICK
Credit cards are hard enough to be made into guitar picks if you or other loved ones play guitar. You can use a special cutting machine to get the perfect cut for a guitar pick, using parts of the card that show their name, signature, or picture.
It will feel nice to be able to include a piece of your loved one into your musical hobby. They can be playing along with you as you strum your guitar.
MAKE A COLLAGE
If you are into arts and crafts or if your loved one was artsy, consider using their cards to make a collage or piece of artwork. Cut up the cards into different pieces and incorporate it into an art piece or use them to make a photo frame.
You can keep a picture of your loved one inside the frame with pieces of the cards they once touched surrounding them.
THUMBPRINT JEWELRY & KEEPSAKES
Your loved one’s credit cards will likely have their fingerprints on them, and possibly their thumbprint. If one of them does, you can use that thumbprint to make thumbprint jewelry.
A person’s thumbprint is the most unique part about them. No one has the same thumb print as your deceased loved one, and no one ever will again. Fingerprints are completely unique to each person. Not even identical twins have the same prints. Thumbprint jewelry for remembrance will allow you to keep the most unique part of your loved one close to your heart.
USE THEIR CARD AS A BOOKMARK
You can consider keeping your loved one’s credit and bank cards as bookmarks. If you are an avid reader who reads multiple books at a time, they will come in handy for keeping your place in your books.
This will especially have meaning if your loved one was also a reader. Whenever you open your book, you will be reminded of your loved one and your shared love of reading.
MAKE A SCRAPBOOK
It’s common for families to want to keep pictures and memorabilia that remind them of their loved ones who have passed on. One way to do this is by creating a scrapbook with your loved ones' pictures, handwritten notes, souvenirs, and even credit cards.
Credit and bank cards are flat enough to include in a scrapbook to memorialize your loved one. You can be creative and maybe place the cards next to a picture of them with something they bought with it.
Maybe they purchased something they were exceptionally proud of, like a grill or big screen television. If you have a picture of them smiling next to their purchase, you can place the card they used to buy it next to that picture.
Resources For Family Members Dealing With Their Loved One's Debt
The Federal Trade Commission fights against unfair or fraudulent business practices in the marketplace. They will conduct investigations and sue companies or people who violate marketplace law. Contact the Federal Trade Commission if you are experiencing trouble with debt collectors. The Federal Trade Commission will help you build a case against them and inform you of your rights.
The Consumer Financial Protection Bureau (CFB) enforces federal consumer financial laws and protects consumers in the financial marketplace. They write rules and enforce laws against abusive or deceptive acts conducted in the marketplace. If you have a complaint about harassment from creditors, file a complaint with the CFB.
Hiring an estate lawyer to help you plan your estate matters before your death will make the process easier for your surviving family. Additionally, they will help your family members navigate the financial situation and understand their rights when it comes to inheritance and your remaining debt.
Consider figuring out ways to resolve your debt now before passing it on to your family to deal with after you die. The more loose ends you tie up now the less frustration and heartache you will leave behind for your family.
Helpful information for what to do when a parent dies. There are many steps involved in dealing with the aftermath of the death of a parent or loved one. This guide will instruct you on what to do immediately upon death as well as how to plan funeral services and more.
Writing a Last Will and Testament is important in ensuring your family members will retain your assets after you die. A detailed will, will resolve any confusion or arguments among surviving family members over who is entitled to what. This guide will help you understand the many things you should consider in writing your Last Will and Testament.
In some cases, lucky family members may be inheriting a rather large sum of money. This can be exciting but also scary if you are not used to having a lot of cash at your disposal. If not handled properly, that money can be easily vanquished. Consider consulting professionals and learning how to maximize your inheritance for better financial gain.
Consider family counseling in situations where multiple family members are fighting for shares of their inheritance. Unfortunately, money can bring out the worst in people. Family members often get greedy when it comes to divvying up funds from a deceased loved one’s estate. If your loved one did not have a precisely laid out will, dividing the inheritance amongst yourselves can become stressful. If you want to maintain relationships with your loved ones, work on ways to avoid family drama.
Look into life insurance resources if you do not currently have a life insurance plan put in place. Life insurance policies can sometimes be the only inheritance your family members will receive if you do not have a large amount of assets. Life insurance will pass directly to your heirs without being subject to probate.
A Deceased Loved One's Credit Card Debt Frequently Asked Questions
Do I have to pay my deceased husband's credit card debt?
Spouses are not lawfully required to pay off their husbands or wife's credit card debt unless they are a joint account holder. In the case of joint accounts, each card holder is equally responsible for paying off the credit card debt. This is not the same as an authorized user, who is someone that may have their own credit card on the account but not the primary account holder.
Any debt that your deceased spouse may have incurred will be taken from their personal assets subject to probate. However, spouses may be required to pay off their deceased husband or wife’s debt if they live in a community property state. Community property states hold spouses liable for each other’s debt, even in death.
Will it affect my credit score if I don’t make a payment on a credit card that I shared with my deceased partner?
Your credit score will not be affected from not making a payment on a credit card that you shared with your deceased partner unless you are a joint account holder. Joint accounts hold each card holder equally responsible for debts incurred in the line of credit.
However, if you are an authorized user and not the primary card holder, your credit will not be affected. You will not be responsible for making payments because the account is not under your name. But if you do make a payment on the credit card after your partner is deceased, the credit card company may be legally allowed to claim that you agreed to pay off the debt. For this reason, make sure not to use any credit cards you shared with your partner after their death.
What debts are forgiven upon death?
When a person dies, their debts are paid off from their estate left behind. Federal student loans and some private student loans may be forgiven upon death. In cases where the deceased’s estate does not cover their debt, then their debt becomes insolvent. This means that the creditors take the loss and do not receive any payment for the deceased’s debt.
Do credit cards get written off at death?
Unfortunately, there is no credit card debt forgiveness after death. When you pass on, your estate will go into probate, which is the judicial period where a court will appoint an executor of your estate to handle financial issues and execute the wishes in your will.
The executor will oversee paying off your debts from your estate before distributing the rest of your assets to your remaining heirs. If your assets do not cover your debts, then your estate will become insolvent.
Will I have to pay off my father’s credit card debt with my inheritance money?
How much money you will inherit from your deceased father will depend on how much debt he left behind. When someone dies, it is the duty of the responsible party or executor of the estate to notify creditors of their death. Creditors then have a certain time period to request payment from the deceased’s estate. This payment will be made to the creditors before the remaining assets are distributed to their remaining heirs.
In some states, beneficiaries are protected from this rule in certain circumstances. For example, if the deceased leaves behind minors, certain assets like the homestead are not subject to creditors. This is to protect the beneficiaries from becoming impoverished if creditors claimed all assets.
What assets are protected after death when a person owes money to credit cards?
Fortunately, there are some assets that are not subject to creditors after death. Retirement accounts, living trusts, brokerage accounts, life insurance, and the deceased home (in some cases) are protected from creditors. The deceased’s other assets will be used to pay off any credit card debt still owed.
What happens if the estate is insolvent?
In rare cases that the amount of debt owed is greater than the deceased’s estate, the family will receive no inheritance. Instead, the money from the estate will go towards paying off debts in priority order. Legal fees are usually paid first followed by funeral and burial expenses. Medical bills and taxes have next priority followed by credit cards and personal loans.
Credit cards are unsecured loans, meaning they have lowest priority in order of being paid off. If no money remains to pay them, then they are simply written off. Secured loans such as a car loan or mortgage will either be reclaimed by the lien holder, or a family member can have them transferred over to their name. That family member will then resume the responsibility for that debt.
Are debt collectors allowed to contact me regarding my dead relative's debt?
Under the Fair Debt Collections Protections Act, debt collectors are not allowed to contact or share any information with you about your family member’s debt. They may contact you only in retrieving information about receiving payment from the estate as handled by the executor.
Debt collectors are legally not allowed to discuss debt with anyone but the debt owner. If you are being harassed by debt collectors, report them to your state attorney general office, the Fair-Trade Commission, or the Consumer Financial Protection Bureau.
Life After Debt
As we’ve learned, debt does not disappear after death. Unfortunately, the surviving family will be left to deal with your financial situation. However, by using the advice in this article and preparing your finances ahead of time you can minimize the stress your family members will incur upon your death.
It is always important to plan for the future, especially a future that you will no longer be part of. Do right by your family and take action against your debt now.
December 10, 2021 by Jeri K. Augustus