Credit card debt after death
When Terry mcdougallmother-in-law has passed away, the Chicago-based executive coach’s family have been contacted by debt collectors trying to get them to pay to cover credit card debts left behind when she died.
They were “alarmed and concerned” by the calls, which came while her family was still grappling with their mourning and funeral plans, McDougall said.
Most Americans are worried about their financial situation, and 21% cited credit card debt as the cause according to a recent NextAdvisor. investigation. But what happens to this debt when someone dies?
McDougall says she and her husband had worked in financial services and they “had an idea” that they weren’t responsible for paying off the credit card debt and decided to do more research. Their intuition was confirmed.
Who pays your credit card debt when you die
Who pays for your credit card debt when you die and where the money comes from can depend on several factors. Estates, wills, and the state you live in all play a role.
In most states, the general answer to the question of who pays your credit card debt on your death is your estate – that is, everything you owned at the time of your death, depending on Leslie Tayne, a debt relief lawyer at Tayne Law Group in New York. Another way to think of an estate is the sum of all the assets, cash and property that a person leaves behind when they die.
You don’t need to have a will or a formal estate plan to have an estate. The debt will always be paid out of the estate when a person dies without a will.
Having a will ensures that once the debts are paid, your estate is distributed to specific people or heirs. A will can also designate a specific person to be the executor of your estate, or someone whose duty is to ensure that all wishes set out in the will are carried out. A probate court must accept any executor named in a will.
While credit card debt cannot be inherited by surviving family members upon death, it can affect how much of your estate is left to your heirs, as the debts will be paid first. by inheritance.
Creditors will have a set amount of time after death to file a claim against the estate, and this amount varies by state. Often, the deceased has expressly stated in the will which debts will be paid by the estate. Otherwise, the executor can order payment of the debts, according to Tayne.
If your credit card debt is so large that your estate can’t pay it, “it basically ends there,” says Ted rossman, Industry Analyst at CreditCards.com. In other words, the “credit card debt actually dies with this person”.
If someone dies without a will, family members can agree on who should become the executor of that estate. If consensus cannot be reached, a probate court will decide, based on state law, who becomes the executor.
There are exceptions. Some states are considered “communal property” states, which means that all assets acquired during the marriage are considered shared by the married couple. In this case, if a spouse dies and leaves debts unpaid, the surviving spouse would be responsible for paying them.
States with community property laws are Louisiana, Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico, and Wisconsin.
Other special cases arise with joint owners and guarantors. When you get a credit card, you become the guarantor of the account – meaning you make a legal promise that the debt will be paid, according to Tayne. A common example is when a person has an authorized user on a credit card – the primary cardholder is the guarantor and responsible for paying the debt.
Authorized users would not be required to pay the debt in the event of the death of the primary cardholder or guarantor. “Nor any heir to this cardholder,” says Tayne. However, if an Authorized User dies, the Cardholder is responsible for the debt accrued by the Authorized User.
If the creditors ask, should you pay?
Just because creditors are calling doesn’t mean you need to respond, says Tayne. If the creditors contact you directly, you don’t have to pay them. If they have a legitimate claim, they can officially file it with the estate attorneys. If they are not or cannot be paid by the estate, surviving family members are not required to pay.
For adults whose parents die, “they will not be held responsible for [credit card] debt, ”says Rossman.
Even after her family learned that she was not responsible for paying off the debt, “there was still bullying from debt collectors,” McDougall said. “There were a lot of things we were dealing with and it was not helpful to have people calling and harassing my husband and his brother.
“What we usually tell people is that unless there is a domain, you are not responsible,” says Tayne. “Send a death certificate and ask them to close the file.”
After doing their research, the McDougalls told creditors “with confidence” that they knew the law and should leave them alone.