What Happens If You Die With Credit Card Debt?

When someone passes away, their financial obligations, including credit card debt, must be addressed. Credit card debt is generally considered unsecured debt, meaning it is not tied to a specific asset like a house or car.

The Deceased’s Estate and Debt Responsibility

Upon an individual’s death, their assets and liabilities collectively form what is known as their “estate.” This estate becomes the primary entity responsible for settling any outstanding individual credit card debt.

Assets that typically comprise an estate and can be used to satisfy debts include bank accounts, real estate, personal property like vehicles or jewelry, and investments such as stocks and bonds. The executor, who is either named in a will or appointed by a court, is responsible for managing these assets and using them to pay off debts. If the estate possesses sufficient assets, the outstanding credit card balances will be paid from these funds before any remaining assets are distributed to beneficiaries. However, if the estate’s assets are insufficient to cover all debts, the credit card debt may go unpaid, as creditors cannot pursue personal funds from the deceased’s family in most cases.

The Probate Process and Creditor Claims

The handling of a deceased person’s credit card debt occurs primarily through the probate process. Probate is the formal legal procedure that validates a will, if one exists, and oversees the administration of the deceased person’s estate. This process ensures that debts are paid, and remaining assets are distributed according to the will or state law.

During probate, creditors, including credit card companies, are given an opportunity to formally file claims against the estate for any outstanding debts. The executor of the estate is responsible for notifying known creditors directly and may also publish public notices to inform unknown creditors of the death and the open probate case. Creditors typically have a limited timeframe, often a few months, to submit their claims to the court or the executor.

When an estate has insufficient funds to pay all debts, a specific order of payment is generally followed, which can vary slightly by state. Typically, funeral expenses and administrative costs of the estate are paid first. These are followed by secured debts, such as mortgages or car loans, which are tied to specific assets. Unsecured debts, like credit card balances, typically come last in this hierarchy. If the estate cannot cover all debts, unsecured creditors may receive only a partial payment or no payment at all.

Responsibility of Surviving Family Members

Generally, surviving family members, including spouses, children, and parents, are not personally responsible for the deceased’s individual credit card debt. The debt belongs to the individual who incurred it, not to their relatives, due to the concept of separate legal entities.

Credit card companies cannot legally compel family members to use their personal funds to pay off a deceased person’s individual debt. The Fair Debt Collection Practices Act (FDCPA) provides protections against collectors attempting to make family members liable for debts they did not personally incur or co-sign. While debt collectors may contact family members to discuss the deceased’s debts, they are prohibited from falsely implying that the family member is personally responsible for repayment.

Special Situations Affecting Debt

While family members are generally not responsible for a deceased person’s individual credit card debt, specific circumstances can alter this general rule. These exceptions typically involve direct financial connections to the account or certain state laws.

If a credit card account was held jointly with another person, the surviving joint account holder typically becomes fully responsible for the entire outstanding balance. This is because both individuals agreed to the terms of the credit agreement and are equally liable for the debt. Unlike joint account holders, authorized users are generally not liable for the debt incurred on the card, as they did not sign the credit agreement.

A co-signer on a credit card account remains fully responsible for the debt even after the primary cardholder’s death. Co-signing means the individual agreed to be equally responsible for the debt from the outset, and this obligation does not terminate with the death of the other party. In community property states, credit card debt incurred by either spouse during the marriage is often considered joint debt. In these states, the surviving spouse may be responsible for the deceased spouse’s credit card debt, even if the account was solely in the deceased’s name. The nine community property states include:

• Arizona
• California
• Idaho
• Louisiana
• Nevada
• New Mexico
• Texas
• Washington
• Wisconsin

Alaska also offers an optional community property arrangement.