When a person dies, his or her credit card debt is not automatically wiped out. Whether a credit card company can recover its debt depends on state law, the amount of property in the decedent's estate, and if anyone else cosigned the obligation. Read on to learn more about what happens to credit card debt after death.
(To learn how to use credit cards wisely so that you don't get buried in credit card debt, see How to Avoid Credit Card Debt.)
Generally, a deceased person's estate is responsible for paying his or her outstanding debts. Depending on state law, when a person passes away, creditors have a certain amount of time to file a claim against the assets in his or her estate. If the decedent's estate does not have sufficient assets to pay the debt, the credit card company is usually out of luck.
Typically, creditors are paid from assets that pass to the decedent's estate and get administered through probate. This includes property devised or bequeathed in a will or not otherwise transferred by any other instrument. This means that creditors can't go after property that goes directly to someone else upon death such as life insurance proceeds to a designated beneficiary, joint accounts with rights of survivorship, or money in transfer or payable-on-death accounts.
If the decedent had a living trust, whether a creditor can go after trust property depends on state law and the terms of the trust. Since each state is different, consider talking to a local attorney about how you can protect your assets from creditors upon death. (Learn more about estate planning and living wills.)
When a person obtains a credit card, he or she is responsible to pay that debt back because of a contractual obligation. A deceased person's family, friends, or heirs do not inherit his or her debts. As a result, they are typically not liable or obligated to pay the debt back with their personal assets unless they were jointly liable on the obligation to begin with.
Exception. In community property states, both spouses may be held jointly liable for debts incurred by either spouse during the marriage. These are called community debts. This means that in a community property state you may be liable for the debts of your deceased spouse even if he or she was the only one on the contract. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin are community property states. In Alaska, married couples can treat their property as community property by agreement. (Learn more about when you owe your spouse's debts in a community property state.)
If you cosigned or were otherwise jointly liable with the decedent on a credit card, you are still on the hook for that debt. The death of your cosigner does not eliminate your obligation to pay the debt. As a result, if the decedent's estate did not have enough assets to pay off the debt, the credit card company can still pursue you to collect it.
Credit card companies and debt collectors are allowed to contact a decedent's spouse, administrator or executor of the estate, guardian, or any other person with authority to pay the decedent's debts from his or her estate. In addition, debt collectors may contact other third parties to obtain the identity and contact information of the person authorized to pay the decedent's debts. However, they may not mislead any person into thinking that he or she has the authority or obligation (whether legal or moral) to pay the deceased person's debts. (Learn more about what debt collectors can and cannot do.)