Dealing with a loved one’s finances after their death can be an upsetting experience. One of the questions we are most often asked is “who pays my credit card debt after death?”
Sadly, 73% of American consumers are likely to die in debt* that often consists of a combination of an outstanding mortgage, credit card balances, and loans—leaving a financial burden for their family to fix in their time of grief.
The most common type of debt left after a person dies is credit card debt. The average total balance owed by citizens who die and who have credit card debt is $4,531.*
Talking about our finances can be difficult, especially as we become older and fear that we will be leaving our partner or children to deal with debt, but it is important to discuss what will happen to credit card debt after death to minimize any financial challenges for those left behind.
Is credit card debt forgiven after death?
If a person dies with credit card debt, the outstanding balance will become a liability on their estate. Creditors can make a claim on the estate, and the executor or administrator will have to pay any debts from the value of the estate before any assets are passed on to the deceased’s loved ones—this process is known as probate.
Although this means that the family is not directly responsible for the unpaid credit card balances, the assets are likely to be reduced, and beneficiaries of the estate will receive less money.
If, after probate, there is not enough money in the estate to cover credit card balances, then the credit card company may be out of luck. Most credit card debt is unsecured, unlike secured loans such as a mortgage, so the card issuer may be forced to write off the debt.
Are there any exceptions?
In certain circumstances, an individual could be responsible for a relative’s credit card debt.
For example, if the person had a joint credit card account with the deceased, they would be responsible for the debt on their card but not that of the deceased person.
In some states, the law requires that the surviving partner pays the debt for certain health care procedures paid for by a credit card.
To avoid potential issues, a relative of the deceased should notify credit card companies promptly when a person dies. The CARD Act of 2009 asserts that the card issuer must then inform the estate executor if any balance is due. The card issuer is not permitted to add any more penalties or fees to the debt while the estate is settled.
Can credit card issuers contact the surviving spouse for payment?
It can be emotionally challenging to receive a phone call from a credit card company following the death of a loved one, but card issuers can contact the deceased’s family to discuss outstanding balances.
To minimize distress, the card company must follow the procedures defined by the federal Fair Debt Collection Practices Act. They must not mislead, infer the surviving spouse is responsible for the debt, or use unfair tactics to try and recover the debt.
It’s wise to talk with an attorney before agreeing to make any payments, and if the person is not comfortable dealing with the credit card issuer directly, they can insist all correspondence goes via the lawyer.
Take steps to relieve debt before death
The best way to ensure that credit card debt after death doesn’t burden loved ones is to clear debts and maintain a healthy financial future.
Effective Debt Relief offers professional financial advice if you are concerned that your family might suffer as a result of debt in the event of your death. We can help with debt counseling, consolidation loans, and debt management programs to give you peace of mind and assure you that your loved ones will be debt free should the worst happen.
With something as important as clearing debts so your loved ones are not financially disadvantaged after your death, it’s crucial to make the right choice when seeking advice on debt relief. Our accredited and dedicated team offer non-judgemental, practical advice to help with your financial challenges and remove the stress of debt after death for you and your family.
For more information visit the Effective Debt Relief website or call 800-940-5449.