Debt in Death: Will Family Have to Pay Your Credit Card Debts?

In these tough economic times, many Americans have turned to credit cards to make everyday purchases. But this has left many Americans with substantial credit card debt.

But what happens to this debt if you die? Generally, the estate pays off credit card and all other debts. In most cases, the estate is not able to cover all debts which leaves the creditors out of luck. This also means that family members are not liable for that debt.

Unfortunately, having to deal with a loved one's passing may not be the only stress associated with a death of a family member. If the debt is from a joint credit card, the other cardholder may still be liable for the debt. If the card was cosigned by both parties, then that debt does not go away. An authorized user only of an account will not inherit the debt.

Inheriting debt can put a serious financial strain on a family member of the deceased. If a substantial debt is inherited and the inheritor is not in a financial position to pay it back, bankruptcy may be an option. Bankruptcy can eliminate many debts and at the very least can prevent creditors from contacting the individual in debt. But, an authorized user should not use the card after the cardholder passes away. This can put the user in serious legal trouble because there are criminal implications.

While a debt that is only the estate's responsibility may seem like the best case for family members, it can leave beneficiaries empty handed. Debts must be paid before any distributions are made which means that an estate that must pay off a substantial amount of credit card debt can mean nothing for the family members.

Death is always a very difficult time for any family member but being aware for possible financial changes can make the transition just a little bit easier.

Source: Fox Business, "After death, who inherits credit card debt?," Sally Herigstad, Aug. 20, 2012

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