Credit Card Debts: What Happens When the Holder Dies?

April 13, 2012 by  Filed under: Credit 

Death is often seen by many as an escape route from the troubles that world could give to an individual. You may not subscribe to such morbid notion but if you are neck-deep in debt, it is possible that you would entertain the said idea. This is because the logic behind this is pretty simple: if you die then you would certainly not have any more trouble with your debts. In fact, it is possible that those whom you have left behind in your family would not be obligated to pay for the said debts. However, it is also possible that someone else would be left to deal with the burden.

If your credit card account happens to be joint account with your wife or any other partner, then that individual would be the one who would carry the burden after you die. The bank or the credit card company would surely take steps to compel your co-account holder to pay for the debts that you have incurred using the credit card. Of course, for that person, this arrangement would just seem unfair. But that is how things turn out in such circumstance. If your wife is your co-account holder, she should just be ready to bear the brunt of the debts when you are gone.

The case is different if the credit card account happens to be yours alone. In this case, the creditor would have no other recourse but to determine whether your estate could be used to repay your debts. The first step to be taken here is that the creditor would find out if you have any property that is left behind. Before such real property could be divided among the heirs, the right of the creditors to obtain payment from the estate is secured first. There are legal statutes that would lay the bases for this action.

However, if you die without leaving behind any substantial estate, then the creditor would have to accept the fact that it has lost in the process. Since it has no one to collect the payment from, the creditor is compelled to declare that the debt is no longer recoverable. In this instance, it is actually the creditor that is left holding an empty bag. Credit card companies and banks, however, do not just easily give up their right to get paid. They would first exhaust all options before they would accept the truth that they could no longer get anything from a dead debtor.

It must be pointed out though that there may be differences also in the treatment of such cases in other countries. In fact, in the US, the differences may even be from state to state. Because of this, is expected that a debtor should read about laws governing debts and repayments. Knowing the said laws would be enlightening. It would even encourage one to be more prudent in spending his money and in acquiring debts. After all, nobody who is sane enough would prefer death to complying with payment obligations.

Jim Oneil is a writer with a special interest in debt issues and personal finance. He has written for small local newspapers in the past and now devotes part of his time writing about debt issues and UK based financial products.

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