Do You Have to Pay Unsecured Credit Cards After Death?
When a family member dies, among the many responsibilities of the heirs is the payment of outstanding debts. Generally, the deceased's unsecured credit card debts must be paid, and the heirs divide what remains. However, rules vary from state to state. Some accounts are protected from creditors, and if the estate is insolvent, heirs may be protected.
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Responsible Parties
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Generally, the estate must pay any secured or unsecured debts left behind. If the deceased was the only person named on the account, the debt cannot be passed to another person, even the surviving spouse, although the spouse is indirectly responsible through the estate. A co-signer or co-borrower is responsible, however. "Authorized users" are not liable.
If the estate is not sufficient to pay the debt, a creditor may approach the surviving spouse or family members for payment. However, they typically are not held liable.
Next Steps
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You should consult a probate attorney familiar with the laws of your state. If the debt is valid and the estate has sufficient funds, the bill should be paid from the estate. Find out from the card issuer what paperwork it requires to close the account -- often, a death certificate is necessary -- and send the required documentation with signature verification. A creditor may ask you to continue the account if you pass a credit check. You may close the account if you wish.
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Collection Calls
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You need to know your rights. If the estate's debts exceed its assets, a creditor may become aggressive in its attempts to collect. Don't make promises to a collector or agree that you owe the debt if you're not sure. Speak with an attorney to determine whether you live in a community property state, and determine who is legally liable for the debt. Visit the Federal Trade Commission's website and review laws pertaining to debt collection and guidelines for dealing with them.
Protected Assets
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Several types of assets are protected from bill collection. Retirement accounts such as 401k plans are safe, provided there are beneficiaries. Rules vary from state to state for other types of accounts, such as IRAs and brokerage accounts. Money held in a trust also is protected from creditors. In some cases, the primary residence is protected as well. Your attorney can advise you regarding your state's laws.
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