On April 22, 2016 the world lost another great entertainer and musical genius in Prince Rogers Nelson. As the world mourns his loss we are confronted with some undeniable truths about life. No matter how much LuxuriousCREDIT a person builds or assets one acquires in this life, the fact remains that in the end, you cannot take it with you. However, do credit card bills and balances follow you to the grave or does the debt die along with the debtor? Will survivors and loved ones be left to carry the burden of bad credit and debt?
In this brief series on debt after death we will address these questions and a few more pertaining to credit card debt and other money owed after death. The answers to the questions above must be customized to fit the situation and there are a number of factors to consider carefully before making a determination. However, there are some basics that you should know in order to prepare yourself for the eventual inevitable that we all must face. In most basic credit terms, if the card was yours alone, with no co-signer or joint account holders, the debt is also yours alone.
When a person dies, their estate is responsible for repaying the balance of any outstanding debts. If the estate must go through probate, the legal process whereby a will is proved in court and accepted as a valid public document that is the true and last testament of the deceased, the executor or administrator will consider your debts and assets and, based on the law, will determine the order in which bills should be paid. Any remaining assets will be distributed, according to the will or state law, to heirs.
There are instances when the assets of the deceased are not enough to cover what is owed. In these cases, credit card companies get the short end of the stick. Creditors receive notification that the estate is “insolvent” or unable to pay debts owed. Balances are then written off an in most cases that is the end of it. Surviving children, spouse, relatives, and friends cannot inherit debt. No credit card company can legally force someone to pay another person’s debt.
The most critical and important question then is whether or not the living are truly responsible for the debt of the deceased person. In order to accurately determine this creditors will investigate whether the account was individual or shared. A spouse, family member, or business partner who signed a credit card application as a co-signer or joint account holder becomes liable for the outstanding balance on the card in conjunction with the estate. If, however, the joint cardholder is simply an authorized user and did not actually sign the application that cardholder is not liable for any outstanding balances and is therefore not responsible for debt that the deceased leaves behind.
There are two notable guidelines for the collection of debt after death. The first is the Credit Card Act of 2009 which requires the executor of an estate to be informed of the amount of a debt quickly and requires credit card issuers to cease the accumulation of penalties and fees while the estate is being settled. The second set of guidelines pertain to the collection of debt from decedents’ friends and relatives. These guidelines were established by the Federal Trade Commission in 2011 in an effort to balance reasonable debt collection practices and prevent overaggressive tactics from creditors.