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What happens to credit card debt when someone dies

On Behalf of | Jul 25, 2014 | Probate And Estate Administration |

When a person dies, all their property becomes part of an estate. A person’s debts do not simply go away when a person dies. Credit card debts usually must be paid out of these assets before any of the assets can be distributed to heirs.

Typically, debts are paid out of the estate if there are any assets worth value. If there are not enough assets to cover the debts, they are usually written off by creditors. There are, however, some exceptions. California is a community property state, which means that a spouse can sometimes be held responsible for paying some of the debts acquired during the marriage. This is not typical; usually, debts are not inherited by any surviving relatives. Creditors do not always hold the surviving spouse liable for the debts of the deceased person.

After the debts are paid, then property can be distributed according to the will or by operation of law if the person had no will. After creditors are paid, state law specifies who has first priority in the inheritance of property if there is no will. A will typically names an executor to carry out execution of the will, and if no executor was named, an administrator can be appointed by a court. This person is responsible for seeing that the deceased person’s wishes are carried out.

A probate administration attorney can help those who are interested in their own estate planning, such as the creation of a will, as well as survivors who have questions about how assets are to be distributed. Creditors have first priority in receiving assets from the estate when a person dies, but sometimes these debts can be settled for less than the amount actually owed.

Source: The Motley Fool, “What Happens to Credit Card Debt When Someone Dies“, Peter Andrew, July 19, 2014

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