Can you inherit a family member’s credit card debt?

If a relative dies with credit card debt, you may hear from the credit card company regarding the  unpaid balance. The lawyers of Fiore & Barber, LLC are experienced in estate administration and handling these types of matters. Here are a few ways to minimize the cost.

When an individual dies, his or her estate may be required to pay all credit card balances and other debts. However, if a person dies with more debts than assets, creditors, including credit card companies can be out of luck — and they often are.

However, there are few exceptions that could leave you on the hook for someone else’s credit card balance after that person’s death.

 Joint cardholders

If you are a joint cardholder, meaning you co-signed for the credit card, you are and will be liable for the debt. This occurs most often with spouses,  parents and their children who are just starting out, or adult children will co-sign with their elderly parents, perhaps to help keep track of expenses.

It should be noted that if you are an authorized user, you are not liable when the cardholder dies. If you co-signed as a joint cardholder, you are liable.

To ensure that you are not a co-signor on a credit card without your knowledge or memory, you are advised to check your  credit  reports regularly. It is suggested that you resolve any discrepancies before a death or divorce or traumatic event.

Who got custody of the credit card?

It is common during a divorce that one spouse agrees to pay off a joint card as part of a divorce settlement. But if the party does not do it or passes away before the debt is paid and the former spouse’s name is still on the card, the credit card company will come after the former spouse for the debt.

Using a card after death

The use by anyone, as an authorized user, after the cardholder’s death could open the user to criminal prosecution.

The same goes for using the card as an authorized user when you know the debt will not be paid. For example, you could be committing fraud if you knew a parent was near death, and the estate did not have money, and you used it knowing it would not be paid.

When the estate loses, beneficiaries lose

Even if you are not held personally liable for the debt on a credit card, if you are a beneficiary you will still feel the effects. Debts are paid from the estate before beneficiaries receive any distributions.

Creditors have a specific time period to file a claim against the estate. When an estate is probated, creditors are prioritized. Credit card debt is unsecured, unlike a mortgage, which is secured by property, or a car loan that is secured by the vehicle. So it is likely the credit card company will be at the back of the line of creditors when it comes to paying debts from the estate; although still ahead of beneficiaries.

Notwithstanding, that certainly does not mean that the credit card company will not try to recover the debt from family members. Taking some pre-emptive action, such as notifying credit card companies that the cardholder has died might  help prevent further action.

Also it should be noted that before any debts are paid out of an estate, including credit card debt, consult your attorney.

The lawyers of Fiore & Barber, LLC are experienced in estate administration and handling these types of matters. Please call us if you have any questions.

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