What Happens to a Person's Credit Cards After They Die?

Seek advice on how to deal with credit card debt after the cardholder's death.

If a person passes away still owing a debt on one or more credit cards, the debt generally does not die with him. The settlement of debt after a death can be complex, and often depends on prevailing state laws. If you are left dealing with an estate where there is considerable credit card debt, it's worth treading carefully.

Joint Card Holder

If the deceased person held the card jointly with another person, such as a spouse, the debt passes in its entirety to that person. This may not be the case for a surviving spouse who had a right to use the card but was not a signatory on the account. In this case, the credit card company may try to argue that the survivor is liable, but it will be much harder to prove.

Single Card Holder

If the account was only in the name of the person who's now passed, his estate is now responsible for paying off the debt. This means the executor must take the credit card balance into account when deciding on the disposal of the assets of the estate. The credit card company may be paid off, depending on the order in which creditors are dealt with and the amount of assets available. If the entire debt is not satisfied, the credit card company must write it off.

CARD Act

The CARD Act passed in 2009 places much stricter regulations on credit card companies. It specifies that if an account holder dies with a balance on the account, the company cannot continue to rack up fees and penalties for non-payment. All activity on the account must stop while the estate is in probate, until the executor can inform the company how the debt will be satisfied.

Community Property States

There are nine states in the U.S. that have what are known as community property laws. They are Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. In these states, it may be possible for a surviving spouse to be held liable for credit card debt incurred by his wife after her death, even if the card was in her name only. If you live in one of these states, it's well worth seeking legal advice in this situation.

References

• AARP: Debts After Death
• Consumer Credit Counseling Services: Managing Debt Following the Death of a Spouse

Resources

• Consumer Credit Counseling Services: Managing Debt Following the Death of a Spouse