Dealing With Credit Card Debt Responsibility After Death

credit card debt after death photoWhen someone passes away, there are a lot of items that need to be dealt with on top of handling the emotional loss of a loved one.

The last thing people want to deal with in this situation is a family member’s financial situation, but addressing these issues early on can help streamline the process and make it far less stressful.

More often than not, when someone passes away, they still have open lines of credit and other forms of debt.

If these items are not taken care of, they can quickly become a problem for surviving family members.

Immediately Cancel Any Existing Credit Cards

The first step in dealing with an individual’s financial situation after they pass away is to cancel lines of credit in their name.

This is as simple as contacting customer service. Once you have explained that the cardholder is deceased and provide documentation, they simply deactivate the card helping to prevent any further charges or cases of fraud.

It is important to recognise that cancelling the card will not wipe out any of the debt– lenders still expect the remaining balances to be paid.

If the account was solely owned by the individual, the estate then becomes responsible for the debt.

Estate Lawyers Can Help Manage Card Debt

When an individual passes away, his or her estate will usually go into probate – this is a process where assets are used to pay off any outstanding debts and occurs before any funds are granted to beneficiaries. Working with an estate lawyer through this process is crucial to make sure all debts are cleared before the remainder of the estate is paid out.

If there are enough funds in the estate to cover credit card debt, those managing the estate should contact credit card companies immediately and request that the account be frozen, explaining that the cardholder has passed away and the estate is being settled.

Check Homeowner Status to Help Pay Off Credit Debt

In the unfortunate event that there is not enough money in the estate to pay off debts, it may become required to sell the home. Homeowner status is key in determining if this is necessary. “Tenants in Common,” for example, means that both tenants own a share of the house and when one passes away, his or her share becomes part of the estate and is used to settle outstanding debts.

“Joint Tenants,” however, means that both tenants owned the entire house and the deceased’s share is passed to the surviving tenant – in this case, selling the home may be required to settle any remaining debt.

Credit Card Companies May Write Off Outstanding Debts

In some cases, there is simply not enough money in an individual’s estate to cover his or her outstanding debts. In this situation, many creditors will simply write off the existing debt – unless you are a joint account holder, creditors cannot seek or collect money from you or your family to cover the remaining balance.

Also, authorised users, or those who were able to use the card but not responsible for repayment, cannot be made to repay any remaining balances. In other words, if you were an authorised user on your spouse’s card and they pass away, the debt is NOT your responsibility.

Losing a loved one is a difficult, emotional situation and adding financial troubles to the mix only adds to the stress. Today, many people have open lines of credit when they pass away and these types of debts can cause problems and headaches for their loved ones.

By dealing with credit card debt early in the process, working closely with an estate lawyer, and checking your homeowner status, the situation can be dealt with simply and in the most effective way possible.

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