Credit Card Debt After Death: What Happens to Credit Card Debt When You Die?
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent, and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or network providers. Read more about our Editorial Guidelines and How We Make Money.
Who Is Responsible for Credit Card Debt When You Die?
If You Have a Joint Credit Card Account
If You Have a Cosigner on a Credit Card Account
If You Live in a Community Property State
Arizona California Idaho Louisiana Nevada New Mexico Texas Washington Wisconsin
If State Law Requires a Spouse to Pay Certain Debts
How Are Your Debts Paid After You Die?
When a person dies, their assets and liabilities (everything that makes up their net worth) is combined, and that’s their estate. An executor or administrator is appointed to handle the estate as it goes through a legal process called probate. As part of that process, it’s the executor’s job to use the estates assets to pay its debts — things like car loans, credit cards, etc. — if possible. Once any lenders have been notified that the borrower is dead, the CARD Act of 2009 states that card issuers have a limited time to notify the executor as to how much money they’re due. Additionally, they can’t ask for any additional fees or penalties while the estate is settled. From there, state laws determine the order in which creditors will be paid. Some assets are protected from creditors when a person dies, including retirement and brokerage accounts, life insurance payouts, and assets in a living trust. The deceased’s home also may be protected, depending on state laws and how the property is titled. If all the assets that are available are liquidated and there isn’t enough money left to cover all the deceased’s debts, some creditors may have to settle for less than the full amount owed. This might not be the case if the borrowed amount is secured with some type of collateral, though. If there’s an outstanding car loan, for example, the lender may repossess the car and sell it to recover its money. Finally, if there’s money or any assets left after the bills are paid — including credit card balances — the deceased’s heirs may receive an inheritance from the estate. But if the deceased had more liabilities than assets, and none of the estate’s assets are protected, heirs could come away with nothing.
Steps for Dealing with the Deceased’s Credit Cards
Step 1: Document Shared and Individual Credit Card Accounts
Step 2: Notify Credit Card Issuers
Step 3: Authorized Users Should Stop Using the Card
Step 4: Keep Up Timely Payments on Joint Accounts
Step 5: Notify the Credit Bureaus
Step 6: Be Cautious When Dealing with Debt Collectors
Negotiating Credit Card Debt After Death
How Can You Prevent Passing Down Debt Problems?
Avoid Carrying a Balance
Talk to a Financial Professional
Find the Right Card for Your Needs
Review Credit Card Options From Lantern
Photo credit: iStock/fcafotodigital
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About the Author
Kim Franke-Folstad is an award-winning journalist with 30 years of experience writing and editing for newspapers, magazines and websites. Her work for SoFi covers a range of topics related to personal finance, including budgeting, saving, borrowing, and investing.
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