Who Pays Off Your Debt When You Pass Away?
The passing of a relative is always hard on a family. It can be made even harder if there are unpaid debt obligations left behind.
During this time of grieving, it’s difficult to know just what to do and when.
So if a credit card company calls saying they are trying to collect an outstanding debt from the deceased, what do you do?
Just who is responsible?
The simple answer is the debts of the deceased are the responsibility of the estate. If there is more debt than assets to cover it, then the debt is usually written off.
But like I said, that’s the simple answer. In practice, the rules are a little more complex. The thing to keep in mind is relatives are almost always protected from creditors by law.
If a creditor or collection agency is attempting to collect the debt of a deceased card member, they are only allowed to speak with the executor of the estate. Any attempt to collect from a relative is illegal and should be reported.
An exception to this is if a spouse or family member is listed as a joint holder on the account. If that is the case, then liability for the debt applies to the surviving card member.
However, it does not apply to authorized users on the account. They are not responsible for the debt.
“During the difficult period of grieving, it’s
comforting to know relatives aren’t responsible.”
Rules to prevent abuse of the system.
If a family member is an authorized user on a credit card account, that user may not use the card to make charges after the card member has died.
Credit card companies have successfully sued in cases like this and have recovered the accrued debt, plus penalties.
Finally, if an authorized user makes legitimate charges on behalf of the card member, those charges may still come back to haunt him or her.
There are cases of credit card companies reporting unpaid debt to the credit rating agencies, even though the authorized user is not legally responsible for them.
These seem to be based on the fact the signature was that of the authorized user, and therefore was incurred by him or her.
Although there is no legal basis for collecting this debt, a good credit history can be severely damaged by it.
During the difficult period of grieving for the loss of a loved one, it’s at least comforting to know relatives aren’t responsible for paying credit card debt left behind.
Rules have been put in place to ensure protection from creditors and debt collectors. If you feel you are being unfairly treated, contact the authorities to report this illegal activity.
Photo source: dyingmatters.org.