Americans have a staggering amount of credit card debt. That means many people die owing thousands of dollars on one or more credit cards. That doesn’t even take into account other types of debt.
What happens if a loved one has passed away with balances on their credit cards?
Who is responsible for paying this debt?
First, if you’re the executor (also known as personal representative) of the estate, you’ll want to make sure you locate all of your loved ones credit cards and other financial accounts so that you can close, freeze or otherwise deal with them. Unattended accounts can attract fraud and theft.
If your loved one had outstanding credit card debt, credit card companies still intend for it to be paid. The good news is that typically, individual family members are not responsible for it unless they were joint owners or co-signers. The exception would be a surviving spouse since California is a community property state. If there’s no surviving spouse or anyone else responsible for the cards, the debt would need to be paid from the estate assets.
That’s why it’s critical to deal with these and other debts before any inheritances are distributed or assets are otherwise disposed of. As the executor, if you don’t pay off these debts as soon as possible or at least communicate with creditors about your intentions to do so when the estate is settled, you can expect creditor claims and collection communications. It’s crucial to remember, however, that collectors can’t demand that family members and/or estate administrators pay the debt except under the circumstances noted above.
What if the estate doesn’t have enough assets?
It’s not uncommon for estates to be insolvent – meaning the deceased didn’t have enough assets to cover their debts. When that happens, it may be necessary for creditors, including credit card companies, to have to settle for partial payments. Typically, secured debts, like mortgages, taxes and other financial obligations have priority over unsecured debts like credit cards. That means some creditors may have to write off all or part of the balance owed.
Administering an estate in California is a big job, even when the deceased doesn’t leave behind more debt than assets. Handling their outstanding debt efficiently and responsibly is key to avoiding unnecessary complications. Getting legal guidance as early as possible can help with what can seem like an overwhelming responsibility.
