If someone close to you dies, the last thing you need is credit card companies calling about debt your loved one left behind. In general, the executor of an estate handles the estate's debts, including credit card debt. Inform creditors of the death and refer them to the estate's executor if they contact you regarding a deceased loved one's debts.
Singly-Owned Accounts
If a person had a credit card in his own name, and nobody else had an account attached to that credit card, the executor of his estate must pay off that debt using the estate's proceeds. The executor must pay off all debts before distributing inheritances. If the credit card debt uses all of the estate's assets, heirs will not get any inheritance. If there is no will, state law determines who is the executor of the estate.
Joint Accounts
If the decedent held a credit card account with a co-signer, such as a spouse, child, or business partner, that person is considered jointly liable for all incurred debts. Thus, the co-signer is responsible for paying off debts, and her credit may be negatively affected if she fails to do so. However, if the person was authorized to use the credit account, but did not co-sign the credit application, she is not responsible for debts and the account is treated like a single-owned account.
Protections for Families
The Credit Card Act of 2009 prohibits credit card companies from charging interest or late fees while a late card holder's estate is being settled. The credit card company must also inform the executor of the total debt owed as soon as possible after learning of the debtor's death. Creditors may not begin collection proceedings against the estate's heirs for unpaid debts unless the heirs are co-signers on the account.
Insolvent Estates
If the debtor's estate lacks assets to pay all of the decedent's debts, the estate is considered insolvent. The executor must decide which bills to pay with the existing assets and inform creditors of insolvency. If a decedent's estate cannot pay off a credit card due to insolvency, the credit card company must write the unpaid amount off as a loss, as heirs cannot inherit debts.
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