When a debtor dies, his estate must prioritize his debts in accordance with state laws and pay off as many debts as possible. North Carolina state law places an extremely low priority on credit card debt; in many cases, the creditor will have to write this debt off once it learns of the debtor's death.
Federal Law
In general, credit card debt belongs to the person who made the charges. Thus, if a North Carolina resident owes money to credit card companies at her death, the executor of her estate must use the estate's assets to pay off the debt. If the estate does not have sufficient assets to repay, the creditor must write off the remainder as a bad debt.
Spouse's Responsibility
If the debtor had joint credit cards with his spouse, she becomes responsible for the entire debt. The spouse must pay it or arrange to do so with the credit card company to avoid negative credit ratings or legal action against her. In North Carolina, surviving spouses must also inform credit card companies of the spouse's death and close all of the spouse's credit card accounts.
Order of Claims
Credit Card debt and other unsecured debt are the lowest priority claims an estate must address in North Carolina. The executor of an estate must first pay property liens and funeral expenses, including the cost of erecting a gravestone. If any funds remain, the executor must then pay federal and state taxes. Next, he must settle any judgments against the debtor and pay outstanding wages to the decedent's employees. The executor can only pay credit card debt after satisfying all of these other obligations.
Distribution of Funds
North Carolina law prohibits creditors from collecting debts from a deceased debtor's heirs, even if they receive life insurance benefits or any other inheritance. Creditors must write off any debt that the estate cannot pay and may not threaten heirs with legal action or other consequences.
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