It’s a question that many have undoubtedly (and uneasily) thought about it, and the answer is not as obvious as you may have thought: If you pass on, does your credit card debt go with you? As Matt Schulz writes in a superb piece for usnews.com, “when figuring out responsibility for a recently deceased credit card holder’s debts, many variables come into play, including where you live. It can get pretty complicated, and sometimes your best move is to get a lawyer involved. Here are a few things you should know about credit card debt after death.” Schulz continues:
“Your card is your debt … sometimes. When examining a loved one’s credit cards, it’s crucial to know whose names were associated with the account. If there was only one name on the credit card account – that of the deceased – the debt may belong only to that person.
“When you die, your estate – all of the money and property you owned – typically pays off the balance. If there’s not enough money in your estate to pay your debts, your creditors may just be out of luck. Your kids and your family typically can’t inherit your debts, and the banks can’t make someone else pay them.
“It can be pretty straightforward under the right circumstances. Unfortunately, it’s often anything but straightforward.
“Community property complicates things. In the U.S., 10 states are so-called community property states. Those states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Alaska has community property laws, too, but only for those who opt-in. In those states, the assets a couple acquires while married typically are considered joint property. The rules don’t just apply to assets, though. Debts can be shared as well.
“If your loved one lived in one of the above states, you may want to get a lawyer who knows the rules of that state. Different states have different rules when it comes to community property, so paying an expert to answer your questions and walk you through the process can be a worthwhile investment.
“Joint account holders’ and authorized users’ responsibilities differ. If you were a joint account holder on a credit card with the deceased, you are liable along with – or instead of – the estate of the deceased for paying off the debt on that card. That’s what you’re signing up for when you agree to hold the account jointly.
“Authorized users don’t bear that burden, typically. They likely will not be held responsible for card balances left behind by the deceased.
“There is an exception: If you’re also a spouse in a community property state, you may wind up being responsible for that card debt, even though you are only an authorized user.
“Issuers can’t drag their feet when settling deceased customers’ accounts. The Credit CARD Act has made it easier on those trying to settle accounts for those who have passed away. The law requires the following:
- If the administrator of the estate requests a credit card balance, the bank must provide it in a “timely manner.”
- If that balance is paid off within 30 days, no interest charges or extra fees – such as an annual fee – can be imposed.
“Those changes were a big deal. In the past, a bank might have been able to drag its feet on providing balance information to the administrator, thus allowing interest and fees to accrue, and the final bill to grow. That’s no longer the case.
“Don’t take a debt collector’s word for it. Unfortunately, dealing with debt collectors can be one of the most frustrating parts of settling an estate. While many collectors do their jobs by the letter of the Fair Debt Collection Practices Act, plenty of others don’t. It’s your job to be on guard and make sure you know the difference. In other words, if they say you owe, don’t just take their word for it. Be sure that they’re right, even if it requires getting a lawyer involved.
“How can you be sure they’re right? Ask for documentation. If the debt is legitimate, they should be able to provide proof. Remember that just because a debt is legitimate, it doesn’t mean that you’re liable for it. For example, if you’re not associated with the card and not in a community property state, you’re probably not responsible for the account, no matter how much collectors may badger or threaten you.
“Finally, make sure the debt isn’t too old to be collected. Every state has statutes of limitations on how old is too old for a debt to be collected. These rules vary from state to state, so it might be wise to consult a lawyer if you have questions. Note: You can unknowingly “reset the clock” on a debt’s statute of limitations if you make even a small payment on a debt, so if you have any questions about an old debt, never make any sort of payment before speaking to a lawyer.
“Communication and preparation can help greatly. Handling a deceased loved one’s accounts can feel like a nonstop wild-goose chase, but some forethought and planning can make things easier on those you leave behind. For example, make a point to gather your most important documents – your will, bank account numbers and more – in one location and then tell the person or people who would be most likely to need them.
“Include a recent copy of your credit report with that documentation. The report should contain information on all your active credit card accounts and can act as a road map to help your estate administrator ensure that nothing gets missed.
“No one wants to think about his or her own mortality, and these conversations can be awkward and even sad, but they can make things much easier on those you leave behind.”