Get To Know The Ghosts Of Credit Card Debt
It’s the ultimate financial ghost story—when we die, our credit card debts continue to haunt from beyond the grave. Unfortunately, this all-too-common tale is more truth than fiction, especially for the elderly and the loved ones they leave behind.
According to public think tank Demos, adults 65 and older are building up debt faster than any other age bracket, averaging at more than $10,000 per senior.
A University of Michigan study suggests that credit card debt may be more prevalent in seniors in part because they hesitate to ask family or friends for financial help. Nonprofit CESI Debt Solutions indicates a more disturbing fact: 40 percent of retirees are simply not concerned with paying off debt during their lifetimes.
The problem is, credit card companies expect payment one way or another, and you could still be left holding the bag. As a family member left behind, it’s important to understand both your financial obligations and options. In a vulnerable state of grief, it’s easy to get lost in the shuffle of assets and estates. You may not even have to pay for debts that you think fall under your responsibility.
Who’s Accountable For Debt After Death?
There’s no universal answer to what happens to credit card debt following a death. It all depends on how the deceased previously set up the account.
- If the deceased was the sole account signer: no spouse or relative will be responsible for the debt. However, you may lose out on inheriting potential assets, which may be used to pay off the debt.
- If you’re an authorized user on the deceased’s account: you’re not bound by any laws to pay off the debt, but you’re cut off from using the account.
- If you’re a joint account holder or co-signer: you’re responsible for the existing debt and future payments.
In the first case scenario, the estate and its assets may go through probate where debts are ranked by importance and paid off accordingly. Assets may include property, vehicles or bank accounts.
As an heir, you may also have the choice to either sell the assets to pay off the debt or pay the debt out-of-pocket to keep them. Creditors will also have to bear losses when there are not enough assets to cover the debt and there’s no joint account holder.
Fortunately, there are some estate-free assets that may be immune to credit card debt collection. Insurance, IRAs and 401(k)s are just a few examples. It may depend on your particular state’s laws to determine which assets are spared.
The Sticky Situation Of Community Property
For at least 10 states that abide by community property laws, marriage not only binds you to a spouse’s property, but it may also hold you responsible for any credit card debt your spouse racked up during the marriage.
Depending on the community property laws of your state, a credit card company may have cause to collect the deceased’s remaining debt from the living spouse. On the other hand, certain assets may be out of a creditor’s reach, like life insurance, pension plans, T.O.D accounts or living trusts. This gray area of post-mortem debt could require legal assistance to help you determine your payment obligations.
Federal Guidelines May Provide Relief
You may be able to lean on your deceased loved one’s estate executor or administrator for juggling the debts against the assets, but you also have rights in your interactions with credit card companies looking to settle up.
The Credit CARD Act of 2009 prohibits creditors from piling on extra charges and interest in the time between death and estate settlement. The law requires balances to be paid off within 30 days.
The FTC also enforces guidelines for how debt collectors communicate with a decedent’s relatives in the Fair Debt Collection Practices Act. In order to curb aggressive calls in these vulnerable situations, know that you’re not required to speak to any debt collectors.
If credit card debt collectors demand any personal information, you don’t have to give it to them and can instead refer them to the estate executor. You also have the right to submit a cease-and-desist letter to stop any harassing phone calls.
Putting Debt Ghosts To Rest
The loss of a loved one is a heavy burden even without debt. But we’re more prone to financial mistakes when we’re vulnerable. Knowing how debt works after a death can help just enough to ease some of the pressures of these delicate situations.