Credit cards can follow us to the grave.
When a person dies with outstanding credit accounts, what happens afterward is a complicated answer. Several factors dictate who, if anyone, will be responsible for the remaining debt. State law and the credit card company policies all influence what will happen to the person’s debt after they have died.
The simplest solution is when the debt is yours and yours alone. When you die, no one else can be held accountable for that debt, according to CreditCards.com. Your estate will be responsible for paying the debt. After your death, if your estate is probated, a legal process for settling the estate of a deceased person, your executors and lawyers will examine the remaining debt and decide in which order the bills will have to be paid. The remaining amount of the estate will be divided up among the named heirs in the will, or according to state law if there is no will.
Your spouse, children or other relatives cannot be held responsible for your debt after your death unless the account is shared. This means you must have signed the credit application and be a joint person on the account. If your estate is declared insolvent, meaning there are not sufficient assets to cover the debts, the credit card company has no choice but to write off the debt. Also, the Credit Card Act of 2009 requires that executors of estates be informed of all debts quickly. The credit card companies are required to stop all interest charges and penalties during the time that the estate is being settled. Any credit card company that tries to reclaim costs through interest and penalty charges during this time is breaking the law.
The only exceptions to the rule are states that employ community of property law, according to CreditCards.com. Generally, assets are considered joint property between spouses. However, under community of property, debts can also be considered joint property as well. Currently, 10 states operate under community of property–Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. If your spouse had a single account and you reside in one of these states, you could possibly be held accountable for his debt. However, not all community of property states take the same view of debts. If you find you are in this situation, consult an estate lawyer.
Should you start getting calls or threats from collection agencies in relation to a deceased person’s debt, CreditCards.com recommends determining if the debt is valid. Don’t just assume it is because the credit card company or collection agency claims it is. Find out if you are in any way liable for the debt. Again, this will depend on the laws of your state if the debt was held by your spouse. Finally, learn to handle collection calls. Remain calm and do not give them any of your own banking details. Never give them your Social Security number. Ask for proof of the debt and who is trying to collect it.
Spouses, business partners and co-signers can sometimes be made responsible for the deceased’s credit card debt depending on the laws of the state. However, authorized users cannot be held liable, according to CreditCards.com. Even if you are a second cardholder with charging privileges, you cannot be held liable for the remaining debt. Only joint account holders who have signed the credit application can be held responsible for the remaining balance.