The death of a spouse can be devastating. Learning about hidden debt and credit card bills can add to the pain. While you may focus on healing from your sudden loss, you may now face problems associated with the debt you did not know about. It can be difficult to decide how to deal with these credit cards.
Assets Must Stand for Outstanding Debts
When a person dies, all of his assets must stand for the outstanding debt. This includes items that a spouse may have owned with you such as a car or a house. If you cannot pay the debts off, the creditors have the right to seize these assets, which could cause you to lose your home. For this reason you will need to work out a way to pay off the debts in full. You may choose to refinance your home to get the extra money or to work out a payment plan with the creditors.
Contact the Creditors
Call the creditors and explain that your spouse has died. You will need to send them a copy of the death certificate to verify that he is dead. You may want to explain that you did not realize that he had these debts--and that you are not a cosigner on the accounts--and ask them if they would be willing to settle the debts now. If you do this, do not send any money to the creditors until they have sent a written letter explaining that the amount you agreed on will stand as payment in full for the debt.
Set Up a Payment Plan and Budget
If you do not have the money to settle the debts right now, you may need to set up a payment plan with the lenders. A budget will help you determine how much money you can find to pay towards these current debts. You may consider using a portion of the life insurance money to pay off the debts so you can keep your home if you can still afford it. If you are not worried about keeping your home, then you may not want to pay off your spouse's outstanding debts if you are not a cosigner on the account.
Prioritize Your Bills and Spending
The death of a spouse will change both the amount your family brings in and the amount that your family spends. Extra debt can make the adjustment even more difficult than you had originally thought. Take time to plan out a new budget as soon as you can. This needs to be a priority because the budget will help you to follow your spending priorities. Look at your situation and determine which bills you need to pay and whether or not you need to move as a result of the death. Do what is best for your family financially and emotionally, and then worry about the other debts.
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