When a person dies, the last thing those close to him want to think about is repaying his credit card debt. However, creditors must be informed so that they stop charging interest on the unpaid debt, and the debtor's executor must determine how to use estate funds to pay off credit card and other debt the deceased person left behind.
Spousal Responsibility
If you and your spouse have joint credit cards, responsibility for the debts passes to your spouse after your death. In addition, if you live in a community property state, your late spouse's debts may be considered to be your property if he incurred the debts during the course of your marriage. As of 2011, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin are considered community property states.
Heirs' Liability
Spouses, children and other heirs are not liable for a late debtor's credit card payments except for the spousal obligations listed above. Creditors cannot demand payment from these people, and it does not affect an heir's credit record if she does not pay the debtor's credit card bills. It is illegal for creditors to tell heirs they have a legal obligation to pay the debt, as debt collectors may not lie to debtors to try to collect a debt.
Debtor's Estate
As of 2011, the executor of an estate must use the estate's assets to settle debts. However, the estate holder must prioritize an estate's debts; if there is not enough money in the estate to pay all debts after liquidating property, the estate holder must pay the highest-priority debts first and let go of the other debts. The estate executor is responsible for contacting creditors to inform them of the situation.
Life Insurance
According to bills.com, life insurance payments are exempt from probate. This means that if an estate has more debts than it has assets, life insurance benefits cannot be used to pay off the debts; the beneficiary of the policy must receive his payments. The policy must list a beneficiary; it cannot list "the estate" as the beneficiary, or the proceeds will go towards paying credit card and other debts incurred during the deceased person's lifetime.
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