What Happens To Credit Card Debt When You Die?



The uncertainty of who becomes responsible for credit card debt when someone dies can be a source of concern for some Australians. We look at what happens to debt, such as an unpaid credit card balance, when you die.

Is Your Credit Card Debt Dying With You? Could family members be asked to pay for it? We shed light on what can be a complex and difficult subject to deal with.

What Happens To Credit Card Debt When You Die?

When a person dies, their debts still have to be repaid and the executor becomes responsible for paying the debts. They can pay off the debt using cash or personal savings left over as part of the estate or, if necessary, sell part of the assets. It is only after all debts are paid off that the remaining assets can be handed over to the successors of the estate: in other words, the people inheriting the assets.

There is a specific order that determines which debts have priority. According to Sydney-based law firm Bateman Battersby, unpaid debts must be repaid in the following order upon a person’s death:

  1. secured debts
  2. funeral expenses
  3. will and administration fees (e.g. legal fees for obtaining probate)
  4. unsecured debts.

It makes sense that secured debts (like a home loan) should be paid first. After all, the lender has the right to sell the asset that serves as collateral for the loan (possibly a house or other property) in order to get their money back. Since credit cards are a type of unsecured debt, they are further down the priority list. But that does not mean that they are deleted when a person dies. In fact, according to Bateman Battersby, NSW, as an example, the executor of the estate has the right to use the assets to pay off debts – and “failure to do so may expose the executor personal liability towards any unpaid creditor ”.

What happens to joint credit card debt if you die?

Generally speaking, you cannot ask other people, including the beneficiaries of the estate, to repay debts after the death of a person. But there are exceptions. Another person may be responsible for paying debts if:

  1. the debt is jointly held by them and another person
  2. the debt is secured by an asset that someone else (such as a beneficiary) owns, or
  3. another person, such as a beneficiary, has agreed to act as guarantor for the debt.

Thus, in the case of a credit card jointly owned by a couple, the surviving partner may be responsible for paying off the full debt of the card if one of the couple dies. Generally, however, family members do not inherit any debt.

What happens to credit card debt if you die and have additional cardholders?

If the deceased was the primary cardholder but family members hold additional cards linked to their credit card account, the debt still rests with the primary cardholder. You cannot ask additional cardholders to pay the debt (because it is not in their name). They will also not be able to continue using the cards, which will likely be canceled by the card issuer upon the person’s death.

What Happens To Credit Card Debt If You Die With No Money?

When a person dies, any overdue credit card debt will normally be paid out of their estate. As we noted earlier, if there is not enough money to pay off the card debt, the assets can be sold to clear the balance.

If there aren’t enough assets to pay off the debt, AH2 Legal law firm says the executor may need to contact the credit card issuer, such as a bank or other institution. financial, to explain that the debt cannot be repaid. , and request that the amount owed be written off.

However, a creditor is not obligated to accept this. If the debt is $ 5,000 or more, a creditor can petition the court asking that a trustee in bankruptcy be appointed to the estate.

Compare life insurance with Canstar

If you are comparing life insurance policies, the comparison table below shows some of the policies currently available in Canstar’s database for a non-smoking male aged 30-39 in professional occupation. Please note that the table is sorted by the number of stars (highest to lowest) followed by the name of the supplier (alphabetical) and contains direct links to the websites of the suppliers. Consider the Product Disclosure Statement (PDS) and Target Market Determination (TDG) before making a purchasing decision. Contact the product issuer directly to obtain a copy of the PDS and TDG. Use Canstar’s life insurance comparison selector to view a wider range of policies. Canstar may earn a fee for referrals.

What support is available?

If you’ve lost a loved one and are struggling financially, you may find it helpful to access counseling and support services.

Bereavement and bereavement counseling services

If you have lost a loved one and are grieving, confidential and free counseling services are available. For crisis assistance, you can contact Lifeline on 13 11 14 or Beyond Blue on 1300 22 46 36 24 hours a day. Specialized bereavement services are also available. For example, in Victoria, the Australian Center for Grief and Bereavement offers statewide grief counseling and support.

Financial advice

If you currently have credit card debt and want help managing it, the following resources can help:

Legal advice

The laws that apply as to who can make a claim against a person’s estate can be complex. It can be helpful to speak with a qualified legal professional for personalized advice on what is likely to happen if you, or a loved one, die due to a credit card or other debt. Free legal advice is available if you have personally received a notice of default or are sued for owing money.

Featured image source: Shutterstock.com/By Elle Aon


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