Does Credit Card Debt Die With You?
Posted on June 16, 2009 at 3:42 am
I was just reading the thread about retirement and debts and it made me think of my credit card debts. I am retired and I have credit card debts because of my medical bills. I haven't defaulted on the payments yet as I am using all of my retirement income on repayments. If I all of a sudden pass away what would happen to my debt? Is it going to die with me? I apologize if it sounds morbid but this can happen to anybody I suppose, when one dies, who would the creditor go after? The family members?
Posted on June 16, 2009 at 3:56 am
It's not morbid at all, in fact a lot of people ask that question, and I think that if there is no one else, apart from yourself, that's listed as a debtor on the account (if nobody co-signed it) then nobody else is liable for it but you. When you die, it dies with you.
Posted on June 16, 2009 at 4:05 am
I agree with pocketfulofsunshine but some credit card companies have a sort of a provision (in the contract) to collect on insurance in the event of the cardholder dying, but I think even if there weren't an insurance rider, if the amount of debt is negligible to the creditor, or if the next of kin is a minor, or is disabled, the credit card company may choose to not make any attempt to collect the balance due anymore.
Posted on June 16, 2009 at 4:07 am
"may choose" not to collect..meaning it is in their discretion and not because it is against some law?
Posted on June 16, 2009 at 4:12 am
Well...yes.
I mean say for example: a couple dies in an accident and left behind over $50,000 in credit card debts, and the next surviving kin is a 12 year old child, their daughter. The couple owns a house, a car, and a business.
1) The amount is significant.
2) The surviving is a minor.
3) There are assets.
If you are the creditor, what would you do?
Posted on June 16, 2009 at 4:18 am
That question gives me strange feelings for the creditors! For once I'm on their side! If I were them, of course I'd collect. Anyway, I've a question. What if the deceased was in a bankruptcy case. What would happen to his/her debts?
Posted on June 16, 2009 at 4:34 am
That is a potentially complicated question, bankruptcy and death is a broad topic, but using helloschuylerfisk's scenario:
1) The amount is significant.
2) The surviving is a minor.
3) There are assets.If the parents filed bankruptcy, those assets are most probably part of the bankruptcy estate, and would be liquidated by the trustee to be distributed to the creditors, and what's left of the estate would probably go to the child's trust fund (but that is another legal scenario) until he/she is old enough to avail of it.
Posted on June 16, 2009 at 4:37 am
doubleickey24 was probably referring to a Chapter 7 bankruptcy.
What if it was Chapter 13 that they filed, and what if there were no assets, who is going to be liable for the repayment plan? Certainly not the child. I think in most no asset cases, providing a death certificate is enough to discharge the debt. I'm not too sure..
Posted on June 16, 2009 at 6:13 am
The debt collector will attempt to collect from a deceased debtor's estate, as they would have the responsibility for taking care of the bills when the debtor passes on. If the estate would go thru probate, it is necessary for the executor of estate to review thru the deceased person's assets and prioritize the debts that need to be paid first. Paying off debts first needs to be accomplished, before the assets can be passed on to the heirs. This will be based on the debtor's will, or on state law if s/he was not able to prepare for one.
Posted on June 16, 2009 at 6:24 am
Just to add to what Karess said. . .
If the assets acquired by the estate aren't enough to pay off the debts of the account holder, the heirs need to sell what they've inherited in order for the debt obligations to be met. If that still won't suffice, the creditor will write off the debt as a liability. Family members are not responsible for debts incurred by deceased cardholders.
So to this effect, yes, debt does die with you.
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