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What Happens to Credit Card Debt When You Die?

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Credit Card Debt

When you’re figuring out how to best deal with your credit card debt. It’s perfectly natural to wonder what happens to them when you die. This is especially true for cardholders near or in retirement — and those who want to make sure they’re looking out for their families’ best interests when making any important financial decision.

The fact of the matter is nearly three out of four Americans (73 percent) die with some form of debt. Credit cards are the most common, beating out mortgages, auto loans and student loans. Here’s more information on what can happen to your revolving debts when you pass away depending on the circumstances of the accounts.

Does Credit Card Debt Disappear After Death?

First of all, it’s important to establish that no, credit card debt does not automatically disappear when accountholders die. Although it would be convenient, this is not how the situation will play out legally.

However, the good news is your partner and/or loved ones are not necessarily on the hook for your credit card debt when you die. However, that doesn’t mean what you owe disappears into thin air.

The bad news is that it may lessen the amount beneficiaries of your estate eventually receive in the form of inheritance funds — and a spouse or family member may be held responsible if they fit any of the circumstances listed above, like holding a joint account or being married in a community property state.

Credit card debt is just as much a part of your estate as your assets — like bank accounts and real estate holdings. So, this type of debt will be covered by positive assets as much as possible. Meaning your beneficiaries will see less or no payment at all after settling up.

While this doesn’t necessarily mean beneficiaries of your estate left on the hook for what you still owe. It does mean that what they inherit may be greatly lessened once credit card debts are factored into the equation.

Will Your Family Have to Pay Your Credit Card Debt?

The next question on your mind likely when might your outstanding credit card bills passed down to your loved ones. The answer to this question depends on the circumstances.

U.S. News & World Report outlines some situations in which a family member might be held responsible for unresolved credit card debt:

  • Co-signing the credit card account.
  • Co-owning a business or property.
  • Living in a community property state, meaning assets and debts taken on within a marriage (not before it) the responsibility of both spouses. There are nine such states: CA, AZ, ID, LA, NV, NM, TX, WA and WI.
  • Being legally required to resolve your estate.

Simply put, joint account holders held responsible for payments on a shared credit card, authorised users on the account cannot. Moreover, if the positive value of your estate won’t cover your credit card debts. And nobody else is liable for them, your lenders may simply have to take the loss.

It does depend somewhat on state laws, as they dictate creditors’ rights following a death. Because physical assets back loans against vehicles and real estate, but credit cards not secured in the same fashion. The latter deprioritized in the grand scheme of repayment.

Still, with all of that said, for the sake of the beneficiaries of your estate, your spouse, your joint account holders and your own peace of mind. It’s worth considering how you can best address your credit card debt in the present.