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What Happens To Your Credit Card Debt When You Die?

When you die, you may pass your credit card debt to others.

Chris Scott

Contributing Writer at Tally

April 6, 2021

Recent statistics show that 73% of Americans die in debt, leaving behind an average balance of $61,554. Of this, $4,531 is from credit card debt. 

If you have a family member or a loved one in debt, you may be wondering what is going to happen to that debt when they pass away. Is it waived? Or do you, as perhaps the surviving spouse or member of the deceased's estate, gain responsibility for this debt? 

Today, we're here to answer the question, "What happens to credit card debt when you die?" Even though the deceased person may pass on other outstanding debts, such as those from car loans or student loans, we'll focus specifically on credit card accounts. This article examines how estates are often left to deal with unpaid credit card bills when an individual passes on. 

Does Debt Die With You? 

In summary, no. When you die, you are still responsible for any debts in your name. Any assets in your estate will be used to pay off debts before they are passed on to your family. The person in charge of doing so is known as the executor. You can name an executor in your will or estate plan. If you have not named an executor, one is appointed by a probate court. 

So, let's say that you die with a credit card balance of $5,000. You have $6,000 in a bank account. Your executor uses $5,000 to pay your credit card companies. You have $1,000 left to pass on to your family. 

However, some assets are protected in the event of death. Debt collectors are not permitted to touch: 

  • Retirement accounts, including 401(k)s and IRAs.

  • Proceeds from life insurance policies.

  • ​Any assets held in a living trust.

  • Brokerage accounts. 

Credit cards are unique because they are often unsecured debts. When you die, secured debts — those backed by collateral, like a mortgage — are highest on the priority scale for debt collectors. Credit card debts often fall to the bottom of the priority scale. But there may still be some scenarios when those named in your estate are required to pay your debts.

What if You Don't Have Enough Money in Your Accounts to Pay Your Credit Card Debt? 

If your estate does not have enough assets to pay down your debts, your estate is insolvent. In these cases, your family may then bear the responsibility of having to pay the debts themselves. 

Note that, legally, debt collectors and creditors cannot require you to pay down debts that are not your responsibility. Whether or not the debts are your responsibility often depends on one of three unique situations, as outlined below. 

1. Joint Account Holders 

If you have a joint account holder on your credit card account, then that person becomes responsible for any debt associated with the account. A joint account holder is a borrower and co-signer on the account. When the account was opened, lenders checked the credit reports of both individuals. The burden of paying the account balances is split equally between the two cardholders. This does not change should one of the two parties die. 

2. Authorized Users 

Many credit card issuers do not issue joint accounts anymore. Instead, they allow authorized users on cards. Authorized users are those who have permission to use an account but have not signed on to bear the responsibility of debt. 

Should someone default on the account or fall behind on payments, the authorized user's credit score is not affected. In these cases, authorized users aren't responsible for credit card debt should the cardholder pass away. 

3. Community Property States 

​If you live in a community property state, the information listed above may be entirely irrelevant. Community property states require surviving spouses to bear the other's debts. If you live in a community property state and you pass away, your spouse automatically assumes the responsibility for your debts. This is the case if they were an authorized user or even if they had nothing to do with the card in the first place. 

Community property states include: 

  • Alaska.

  • Arizona.

  • California.

  • Idaho.

  • Louisiana.

  • Nevada.

  • New Mexico.

  • Texas.

  • Washington.

  • Wisconsin.

There are variations from state to state. Seeking legal advice from an estate planning expert is recommended to find out what your responsibilities are if your spouse dies and how your specific state laws will affect repayment. 

What Steps Do I Take if a Loved One Dies With Credit Card Debt? 

If a loved one dies with credit card debt, there are a few things that the estate needs to do, but not until speaking with the executor and an attorney. They will better guide you on how to handle your specific situation. But there are general guidelines to help ensure you properly handle a loved one's credit card debt. 

1. If You're an Authorized User, Stop Using the Card 

If the account holder passes away and you continue to use the card as an authorized user, you are committing fraud. Make sure that you do not use any cards on which you're an authorized user. 

You can continue using the card if you are a joint account holder. As a joint account holder, you co-own the account, and payments affect your credit score. If there is debt, you'll want to ensure that you at least make minimum payments to avoid late fees. 

2. List any Credit Card Accounts in the Deceased Person's Name 

You should also get an idea of which credit card accounts an individual has open. Ask the estate executor for a copy of the deceased's credit report. This can help you avoid surprises down the road, allowing you to better prepare for any debt you need to pay off. 

3. Notify the Person's Credit Card Companies of Their Death

You should close any account on which you are not the joint account holder. Reach out to the respective credit card companies and ask for the accounts to be closed. Doing so will prevent fraudulent activity down the road. 

If you are a joint account holder, you have the option to keep the account open in your name only. However, the terms and conditions may change once you are the sole cardholder. 

4. Notify the Credit Bureaus of the Person's Death 

To help prevent fraud and identity thieves from opening accounts in the deceased's name, you should contact the three credit bureaus: 

  • Equifax.

  • Experian.

  • Transunion.

When doing so, you will need to provide a copy of the death certificate and the deceased's Social Security number to close the account. 

What Can You Do to Avoid Credit Card Debt? 

If you have credit card debt, you may want to make efforts to ensure you do not pass it on to your spouse, next of kin or other parties in your will. 

If you currently carry credit card debt, you may want to check out Tally. Tally is a credit card payoff app that manages your funds in the most efficient way possible. Tally automatically makes minimum monthly payments on your cards while strategically paying off your balances. This saves you money on interest and helps get you out of debt more quickly. 

Managing Debt Now Prevents Further Issues When You Pass Away 

What happens to credit card debt when you die? Depending on the situation, it could pass on to members of your estate. Debt does not magically disappear when you pass away. Instead, credit card companies and debt collectors will look for outstanding balances to be resolved through the assets in your estate. 

In certain scenarios, like if you have a joint account holder or you live in a community property state, someone else would become responsible for your debt. 

If you currently carry outstanding credit card balances, using a debt management app like Tally can help you quickly get out of debt and free up cash.

Disclosure: To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.9% - 25.9% per year, and will be based on your credit history. The APR will vary with the market based on the Prime Rate.