When someone dies, their credit card debt is paid off by any assets they own. The debt has to be paid first before their heirs or surviving spouse can receive their share of the estate. The process of paying off debt after a death varies depending on several factors. For example, the process is slightly different if the deceased has a will.
When they die, your credit card debt doesn't die with them. Here's a more comprehensive look at different scenarios that may apply when someone dies with credit card debt.
If They Have a Will or Estate Plan
If they have a will, the executor is usually in charge of paying off the deceased’s credit card debts. An executor is an individual named in a will or estate plan to carry out the testator's wishes when they die.
The executor will prepare a list of debt accounts the testator supposedly owes. This individual will then contact the debtors to notify them about the death. After the notification, debtors can't charge extra fees or fines on the debt account in question while settling the estate.
In most cases, the executor will be required to provide proof of death, usually a death certificate. They can also request proof of debt ownership from the debtor.
What if the testator’s assets are insufficient to pay off the credit card debt? In that case, the credit card company might write off the debt account as a loss. This is because credit card debt is uninsured, meaning the debt collector won't have any collateral to recover.
However, under certain circumstances, the credit card company might find it necessary to go after particular members of the testator’s family or inner circle. Here are some examples:
If you cosigned the credit card account with the deceased, you might be responsible for the remaining balance.
Joint Account Holders
If you were a joint credit card account holder with the deceased, you might be responsible for the debt account.
Survivors in Community Property States
You may be responsible for the credit card debt account if you're a survivor living in a community property state.
In community property states, spouses who acquire property during marriage own the property equally. This ownership includes debt accounts acquired during the marriage. Examples of community property states include Arizona, Idaho, Louisiana, California, Washington, New Mexico, Wisconsin, Texas, and Oklahoma.
You may also be responsible for the deceased's credit card debt if:
- you're their spouse, and state laws require that you pay off the debt. This usually happens with certain healthcare expenses paid for with a credit card; or
- you were legally responsible for administering the estate, but you didn't comply with certain probate laws as required by the state.
If They Don't Have a Will or Estate Plan
If the deceased doesn't have a Will or Estate Plan, the state will appoint someone to play the role of the executor. This individual will use the deceased's estate to pay off the outstanding debt accounts. The remaining assets will then be distributed to the surviving spouse or children. If the deceased doesn't have a spouse or children, the state divides the assets among the deceased's immediate family.