If you are the executor of someone's estate, or you have a family member who just passed away, you may be unclear of what to do with the unpaid credit card bills that he has left behind. Debt is not inherited, though the value of the estate must pay toward any debt before the heirs can divide the remainder. Credit cards may be the last bills paid by the estate though.
Notify the Credit Card Company
Send a letter of notification to the credit card company explaining the person has died, and you will let them know how much the estate will be able to pay once everything is settled. You should include a copy of the death certificate in the letter. Send the letter via certified mail so you can track when they received it. Keep a copy of each letter and proof of receipt with the file.
Settle the Estate
Items need to be sold from the estate if the deceased had outstanding debts. Loans with collateral such as mortgages, and car loans have first priority in being paid off. You need to sell the home and you can use the equity you receive from the house toward credit card debt. Any bank accounts, which are not part of a trust, are also used toward debt before it goes to any heirs.
Determine How Much to Pay
If you do not have enough money to pay back all of the credit card debts, determine how much you will pay to which creditor. It is often best to pay a percentage to each creditor, with an explanation that the estate only covered that much of the debt. Divide the amount you have to pay toward debt by the total amount you have of debts owed. Then apply that percentage to each debt. For example if you have three debts that total $10,000 and you have $8,000 to pay, you would divided $8,000 by $10,000 and get .8. You would pay 80 percent of each debt.
Pay Each Debt
Write a check to each credit card company explaining that the estate could only cover that percentage of the debt and request that the account be closed, and to consider the debt paid. Credit card companies cannot pursue anyone who was not an owner on the account for debts once the cardholder is dead. The debt will be closed, and they should send you proof in writing. File this with the other paper work associated with the estate.
Warning
Do not pay on credit cards once the person had passed away. Many executors or children pay on the credit cards even though they are not responsible for the debt. You will not receive the money you pay back. A letter to the credit card company about the death stops harassing phone calls until the estate is settled. If the estate cannot cover the debt you are not responsible for it.
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