Death and Credit Card Debt

There are few things in this world more devastating than death. You’re already grieving and before long, often before the shock has even worn off, you realize you must begin dealing with what’s left behind. And what’s left behind is the financial life of the deceased.

Who pays credit card debt? When is it forgiven? Does the estate pay it? The questions can quickly overwhelm you and then the answers, with all the legal jargon, will have most of us running for cover. Below are a few tips on what to do – and just as importantly, what not to do – once you begin dealing with this aspect of your loved one’s life.

Keep in mind, however, nothing replaces the value of solid legal advice and bottom line – that’s what you should ultimately seek out and then adhere to. These guidelines below might vary from state to state and there is no shortage of dynamics that will alter what ultimately becomes of the estate following probate. That said, these are the basics and barring any extenuating circumstances, there’s a good chance things will fall right along the line.

Assume Nothing

This is more than Glenn Close’s evil character’s advice on Damages; it’s actually sound legal advice many attorneys will tell their clients. This is especially true as an estate begins the probate process. If you, out of good faith, made a payment to a credit card company following the death of a family member, there stands a good chance it will be construed as you taking full responsibility. In some states, the moment you do that, full ownership transfers to you. It’s best to let the probate court or your family attorney lead the way.

Your Name on the Account

Generally, there are two reasons for anyone being on an account: for convenience – such as when a parent places her college bound student onto her Visa; and the co-owner, which means responsibility falls onto both parties whose names are on the account, such as what a husband and wife will sometimes (but not always) do. It’s just as common for a husband to add his wife as a cardholder as it is for the couple to jointly open the account. This is sometimes seen with couples who marry after the account’s been opened.

Joint What?

Joint tenancy is exactly as it sounds: more than one person who owns the same piece of property or real estate (or other assets). This is where it can get a bit confusing for those who are less than legalese-inclined. Rights of surviviorship kick in and in some states, creditors may claim that the deceased owned half of the asset (and therefore, half of that asset should be used to pay outstanding debt); but there are clauses that include “tenants by the entirety”.

This means the assets or property transfers in its entirety upon death. In other words, a deceased person simply cannot own anything. This has been the saving grace for many. Again, though, your attorney will explain it all, especially considering this may vary from state to state.

When Will This End?

Probate can last several months, depending on where you live. It’s considered the timeframe in which creditors can make claims against any assets the deceased had while living. Your attorney or the probate court may ask for a list of creditors so that they may notify them. Further, you may be required to run an ad in your local paper once a week for three consecutive weeks.

This is done to ensure the survivors have made good faith efforts to notify anyone who might have an interest in the estate. You might also be able to uncover some creditors by checking recent tax returns. This is especially helpful if your spouse generally covered the financial aspects of your lives. You may have no idea of how much money is in savings, the retirement funds or even property owned. You certainly need to know this, regardless of whether the deceased person’s estate is in probate or not.

Death is difficult enough without folks with financial interests further complicating the grieving process. This is why it’s important to let a legal professional go through the credit card statements, mortgages and bank account statements. They have the advantage of perspective and while your family attorney may have known the deceased person well, he or she isn’t grieving to the extent family members are.

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