Credit Card Debt After Death – Who’s Responsible?

Does credit card debt go away when you die?

Just because someone passes away doesn’t necessarily mean their debt goes away. Typically, the deceased person’s estate is responsible for paying any unpaid debts. There are also a few instances when a surviving spouse or a beneficiary may be responsible. 

However, if there is no money or property in the estate and no one else is legally responsible for the debt, the creditors will need to write it off and it essentially does go away. Note that in some cases, family homes or other assets that beneficiaries expect to receive are instead sold to pay debts. 

Note: Assets that cannot be pursued by creditors may include retirement accounts, life insurance proceeds, living trust assets, and brokerage accounts. 

What happens to credit card debt after death?

When a person dies, their assets pass to their estate. If state law requires that unpaid debts be paid, it’s done with any money or property left behind. The person in charge of managing the estate called the executor, pays credit card debt using the estate’s assets during the process called probate. 

If there is no money or property left, the debt typically goes unpaid. Generally, no one else is required to pay those debts, including credit card debt.

For example, say someone dies with $20,000 in their bank account and $5,000 in credit card debt. The executor would use $5,000 from that bank account to pay off the credit card companies. If there are no other debts, the remaining $15,000 would go to any beneficiaries. 

Unsecured debt, including credit card debt, is the last type of debt repaid if the deceased has other debts. The first to be paid include debt to the federal government or state government, secured debt, and administrative and legal fees of the estate. 

 

Who is responsible for credit card debt after death?

1. The estate

The estate is primarily responsible for paying off credit card debt. The estate is made up of everything the person owned before death. The executor will use the assets in the estate to pay outstanding debts. 

However, if you have more debts than assets, the estate is insolvent. 

2. Probate

Probate is the process of gathering the decedent’s assets, paying creditors and any taxes owed, and then distributing the remaining assets according to the will or state law. 

3. The executor

The executor is the person (or entity) appointed by a will and/or a court to administer the estate of a deceased person. They help ensure all appropriate assets go through probate and that any debt, including credit card debt, is paid. 

4. Beneficiaries

The beneficiary is the person (or persons) legally designated to receive the benefits or financial assets of a deceased person. In most cases, family members and beneficiaries are not responsible for paying the credit card debt of the deceased. 

However, there are two situations when someone can inherit credit card debt and be legally required to pay off what’s owed:

• If you were a cosigner or joint account holder on the credit card. 
• If you are a surviving spouse and live in a state with community property laws.

Authorized users on a credit card account are not responsible for unpaid debt, but they also aren’t allowed to continue using the account. 

Steps to take when a cardholder dies

1. Make a list of all accounts

The first step is to create a list of all of the deceased person’s credit card accounts. (You may also want to include other financial accounts as well.) This will help you understand how much is owed in credit card debt, and what assets the estate may have available to pay it off. 

2. Stop using any credit cards

Unless you and the deceased were joint account holders on a credit card, using their credit card account after they die is considered fraud, even if you are an authorized user. It’s important not to use their credit cards at all. In fact, it’s best to destroy them or return any cards tied to the account.

Make sure to cancel any recurring payments so that the card doesn’t accidentally get charged, such as for utilities, phone bills, or subscriptions. 

3. Notify the credit card company about the death

Check the back of the credit cards for the card issuer’s customer service phone number. Ask the representative to flag the account and review the process for closing the card. In most cases, you’ll be required to send a copy of the cardholder’s death certificate to formally close the account. 

You’ll want to do this as soon as possible to stop interest from accruing and being charged any other fees. You may also discuss paying off the balances on those cards at that time. 

4. Notify the three consumer credit bureaus

You must also let the three consumer credit bureaus – Experian, Equifax, and TransUnion – know about the death so they can note it on their credit profile. You may request to put a credit freeze on that account. This will help prevent identity theft and ensure no one can open new credit accounts in the deceased person’s name. 

Learn more: The Three Major Credit Bureaus

How to protect assets from creditors

Unsecured debt is typically not the highest priority for creditors, and in fact, depending on the state of residence, the statute of limitations on how long creditors can pursue payment after death can vary. 

The most important thing to do to protect assets from creditors is to know your rights. Know when lenders can and can’t legally force you to pay remaining debts. For example, according to the Fair Debt Collection Practices Act (FDCPA), creditors cannot coerce survivors of a deceased debtor into paying off debts that they are not financially responsible for. 

Also, be aware of any state laws on different types of debt. 

Credit card companies should always present Proof of Claim when requesting payment from the estate, so be sure this is present. If you are contacted directly by creditors, seek the help of an attorney to ensure all the right steps are followed, especially if you have joint accounts with the deceased. 

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