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What happens to credit card debt after death

A loved one's death is traumatic enough, but when the deceased leaves behind credit card debt, it can mean even more headaches and stress. CreditCards.com's Dana Kochnower takes a look at what happens to credit card debt after death and who is responsible for repayment.

Voiceover: As the recession drags on, more and more Americans are having a difficult time making ends meet.

David Jones, president, Association of Independent Consumer Credit Counseling Agencies (AICCCA): "We're seeing people with a lot of debt these days. More than they have had in the past."

Voiceover: And it's hitting older Americans especially hard. According to a survey by the Federal Reserve, about half of all households headed by someone aged 55 to 64 carry credit card debt. And more than a third of those headed by someone aged 65 to 74 are also carrying credit card debt.

It's an issue, Jones says he's seeing more these days...

Jones: We're also seeing a shift of difficulties with older Americans. They're reaching retirement age or have already retired, so, yeah, it's a serious problem."

Voiceover: If an older parent or spouse dies, sometimes they leave some of that credit card debt behind. So who is responsible for paying it off?

Elder law attorney Ron Fatoullah: The debt does not die when they die. Their estate would have to pay off their debts... certain things get paid off first... There's funeral expenses, that's a priority. There's administration expenses to administer the estate. Of course, the US federal, state, local taxes get paid.

Voiceover: Here are the basic rules... If a card was in an individual's name only, then only that individual is responsible for the debt. If the account is a joint account, then the surviving account holder is responsible. If someone is an authorized user but not a joint account holder then that person is not responsible for the debt. The exception to the rule is in states with community property laws.

Fatoullah: During the lifetime of the husband and wife, the assets are considered each other's. And as they grow, it's their joint asset -- that's the community property aspect of it. So when one of the spouses dies, in many of the community property states, the surviving spouse, whether it's a husband or wife, will be responsible for the debt of the deceased spouse.

Voiceover: If there's not enough money in the estate to cover the debt, Fatoullah says it's tough luck on the creditors.

Fatoullah: Credit card companies can call, they can cry, they can moan, but those debts will not be paid

Voiceover: Still, Jones says, it doesn't always stop credit card companies from trying.

Jones: Collectors will do almost anything to collect the debt. That's their job, so consumers need to understand that and not be intimidated. That's the big thing: Do not be intimidated by threats at all.

1 Comment

  1. M.Bloom.

    How about a co-signer on a mortgage? What about an adult child who has access to a checking account?

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