What happens to credit card debt if the cardholder dies? Does credit card debt just disappear when someone dies?
When a loved one dies, there is an incredible amount of stress. Much is required on the part of those closest to the deceased in order to not only take care of funeral arrangements, but also to clean up end-of-life paperwork and obligations on behalf of the person who has passed away.
Many of the person’s personal paperwork, including banking, bill paying and the like, still remain and must be dealt with following the individual’s death. One of the most common and complicated things to be faced with is credit card debt left by the deceased.
The Role of the Estate and Credit Card Debt
Typically, the first place a credit card company will turn for reimbursement of any outstanding debts in the case of death is to the deceased individual’s estate. If there is any money available, it will first be used to settle any existing debts that the deceased left behind. If this amount is insufficient to take care of the credit card debt, the estate will need to liquidate assets in order to pay off the debt. If the entire estate has been liquidated and there are still outstanding debts, credit issuers will likely forgive the remaining portion. However, they will try each and every way possible to get the money if there is any chance at all.
Those Who Are Part of the Credit Card Contract
Often if someone has a credit card, there may be other people who are a part of that contract also. If the deceased was married, the credit card may be a joint account with the spouse. If this is the case, the credit card company can come after the spouse for any outstanding balances after liquidation of the estate and he or she will be held responsible, regardless of who actually incurred the debt. If the deceased individual was the only card holder and the spouse was not a party to the contract between the credit card company and the deceased, then the spouse is not responsible for the debt left behind on that card.
If an individual has used a guarantor or co-signor for the credit card, the issuer will typically turn to that person to take care of the remaining debts also. The role of such an individual is specifically for such situations whereby a cardholder cannot pay the entire debt, it then becomes the responsibility of the co-signor. Becoming a party to the contract is not simply a matter of helping someone obtain a credit card. True financial responsibility is attached, and death is one situation where you will definitely need to follow through on your commitment if the estate fails to settle the amount.
The Responsibility of Other Family Members and Heirs
Typically if the estate of the deceased has been exhausted and there are no co-signors or other cardholders, the credit card company is out of luck and will simply have to take a loss on the outstanding debt for that credit card. Other family members and heirs of the deceased are in no way responsible for the credit card debt. In fact, the only way residual debts impact the heirs is by reducing, or possibly even totally eating up, the estate and leaving nothing for them.
On occasion heirs, family members or the spouse of the deceased person may receive a letter from credit card companies requesting settlement of the debt. If such a situation arises, simply forward a copy of the death certificate, along with a letter of explanation to the credit card company. This should stop all future collection attempts. If not, a lawyer may be helpful. This is one of those attempts by the credit card company that is actually rather underhanded as they are aware of the legitimate ways to collect on debts of the deceased. However, this type of contact is enough to convince certain individuals to settle the balance because they don’t know better.
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