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What happens to credit card debt when you die?

Yahoo Personal Finance· Getty Images
Updated 7 min read

It's a morbid yet common worry: What happens to credit card debt when you die? Considering that the average credit card balance per person was $6,365 in 2023, there's a good chance you may leave an unpaid credit card balance if you pass away unexpectedly.

What happens to your credit card debt and other outstanding money they may owe depends on several variables, including where you live, the value of your estate, and whether or not your partner was a joint cardholder.

A common misconception is that death always leads to debt forgiveness, but that's not the case. With some forms of debt, such as federal student loans, the debt is discharged if the borrower dies. But that is an exception, not the rule, to how debt is typically handled.

Credit card debt doesn't go away when the cardholder passes away. It must be repaid from your estate, which means your loved ones may receive a reduced inheritance — or no inheritance at all.

If you pass away and have outstanding credit card debt, it's repaid from your estate — a term that refers to your individual assets, including any property you owned, bank accounts, or other valuables you accumulated during your lifetime.

When you die, your estate typically enters probate, a legal process that handles the transfer of your assets. It ensures that all of your debt and taxes are paid before issuing the remaining funds to family and friends.

In most cases, the executor — the person listed in the will as responsible for carrying out the deceased's wishes — is responsible for settling any outstanding debts from the estate. If there isn't a will, the court may appoint an administrator or personal representative to handle it.

Typically, your relatives or friends don't have to pay off your credit card debt with their own funds. However, there are some exceptions:

  • You were married and you live in a community property state: In community property states, the deceased's spouse is responsible for repaying credit card debt that their partner accrued. As of 2023, community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

  • You had a joint credit card: If you had a joint credit card shared with a partner or relative, the joint user is responsible for the full outstanding balance. Notably, only joint users are responsible for repaying credit card debt; if your partner was an authorized user, they aren't legally responsible for the debt.

Family members are rarely responsible for a loved one's credit card debt. However, debt collectors may still contact the deceased's immediate family members to try and collect unpaid balances. However, they cannot state or imply that you are personally responsible for the debt unless you are the spouse in a community property state or the joint account holder.

If the debt collector claims that you owe money, request a debt validation letter showing that you are legally responsible for the debt. Otherwise, you have no legal obligation to repay it.

When you pass away, your estate has to repay any debt owed, including credit card debt. Debt is repaid in a certain order; in general unsecured debt, such as credit card balances, are the lowest priority, and they're repaid last. If the estate's value is exhausted before repaying all of the debt, it is considered insolvent, and the credit cards may go unpaid.

While most estate assets will be used for debt repayment, there are some accounts that are exempt:

  • Retirement accounts: If you have money saved in a 401(k) or Individual Retirement Account (IRA) and have a designated beneficiary, the account's ownership passes to the beneficiary upon your death. As a result, the value of that account is exempt from debt repayment since it no longer belongs to you or your estate.

  • Life insurance death benefits: Because life insurance death benefits are paid out to your beneficiary, they are exempt from debt repayment too. If you pass away with a life insurance policy in force, your beneficiaries will receive the full death benefit amount; any credit card debt you have won't reduce its value.

If a loved one has passed away and you think they may have outstanding credit card debt, there are six things you should do:

After a loved one passes, there may be ongoing expenses, such as their home's utility bills or funeral costs. While it may seem like using their credit card is a convenient way to pay for those expenses, the cards cannot be used once the primary cardholder passes away.

Even if you are an authorized user, you cannot use the cards after the primary cardholder's death; if you do, it's considered credit card fraud.

Your loved one may have had credit cards or loans in their name you didn't know about (or that they forgot about). You can request a copy of their credit reports for free at AnnualCreditReport.com. The credit reports will show what accounts are open in their name, and what the balance is on each account.

Using your loved one's credit report, contact the creditors of any open accounts about the deceased's passing. The credit report will list the creditor's name and contact information, including their mailing addresses and phone numbers.

The creditor may require you to submit documentation to close the accounts, including:

  • A copy of the deceased's death certificate

  • Proof that you are legally authorized to handle their estate, such as a legal document listing you as the estate's executor

Next, notify the credit bureaus — Equifax, Experian, and TransUnion — of your loved one's passing. You'll need to submit a notification in writing along with the following information:

  • A copy of the deceased's death certificate

  • The deceased's Social Security number

  • Proof that you are authorized to act on their behalf, such as a copy of a legal document that names you as executor

  • Your mailing address

  • A copy of your driver's license or other government-issued ID

You only have to submit that information to one of the credit bureaus; that credit bureau will then notify the other two on your behalf.

You can mail that information to one of the following addresses:

  • Equifax: Equifax Information Services LLC P.O. Box 105139 Atlanta, GA 30348-5139

  • Experian: Experian P.O. Box 9701 Allen, TX 75013

  • TransUnion: TransUnion P.O. Box 2000 Chester, PA 19016

Laws can vary significantly by state; If you aren't sure if you are responsible for a loved one's debt after their death, it's a good idea to consult with a lawyer in your area who specializes in consumer law, estate, probate issues, or debt collection. It's wise to meet with a lawyer before speaking with or confirming an account with a debt collector.

You can find lawyers through your state bar association.

If a debt collector reaches out to you about a deceased loved one's death, they are legally required to provide you with specific information about the debt during the first communication with them or within five days of the first communication.

If the debt collector claims you owe a loved one's credit card balance, the notice — known as a debt validation notice — must include the following details:

  • A statement that it comes from a debt collector

  • The name of the deceased and your name

  • The name of the creditor who is owed

  • The account number associated with the debt

  • Itemization of the current debt, including late fees and interest

  • The current amount of debt at the time of the notice

  • Instructions on how to respond if you think you don't owe the debt

  • An end date to the 30-day period when you can dispute the debt account

You have 30 days after receiving the notice to dispute the debt.

No one wants to think about their own death, but knowing what happens to your debt after you're gone can help you plan for the future. If you're worried about leaving behind debt, paying down your balances, or getting a life insurance policy that's large enough to cover your debt can be excellent ways to protect your loved ones.

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