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January 08, 2022

What happens to credit card debt when you die?

It must feel scummy being a creditor sometimes.

By many accounts, creditors must come a-hounding if a family member – should they have carried a balance on their credit card – passes away.

The question(s) of the day, though: does a spouse or loved one’s card debt transfer to you upon their death? Are you responsible for paying it?

The simple answer is no. According to debt expert Margaret H. Johnson, most credit card balances do not fall into the laps of widows, children or parents after loss of life, as rumoured.

But there are things you need to be aware about – most importantly signatures, and who has signed for what purchases.

If the deceased’s debts were exclusively his or hers – that is, it was only their account with no one else as a joint holder – the debt is theirs and theirs alone. If there is not enough left in the deceased’s estate to cover the loss, credit card companies will have to write this debt off as uncollectible.

What you are liable for is what you’ve signed for, whether that be as a joint card holder at the time of the account’s opening or as someone with charging privileges making a purchase. So, if Joe buys a plasma TV on his wife Susan’s card weeks before she passes, that is his debt to cover even if it wasn’t his credit account.

But using that same scenario, if Joe and Susan were shopping together and Susan signed for the television, that would be her debt and could not legally be transferred (money-wise, at least) to Joe upon Susan’s death.

Of course, that is not to say some creditors won’t try to make you think otherwise.

Consider the case of an Oregon woman who was stuck with her husband’s $14,000 credit card balance when he passed away.

Since there wasn’t enough cash left in the man’s estate to cover the debt, she learned (rightly) that she was not responsible for the debt her husband had racked up. She soon stopped making payments, but that’s “when things got ugly,” reports CreditCards.com.

Over the next 32 months, the woman was routinely harassed by six different collection agencies who – despite being incorrect – called 24/7, even reporting her to credit bureaus for non-payment.

The card company eventually ended up suing the woman, a futile effort since she was not a co-signer on her husband’s account. After she hired an attorney, the creditor soon dropped the suit.

“They didn’t understand the hell they put me through,” she tells CreditCards.com, advising not to “let them bully you. Stand your ground. Make sure you get the facts, and challenge them.”

And the fact is, you are not responsible for any debts you have not contractually created. Unless you’ve signed for the debt, someone else’s liabilities cannot become your financial responsibility upon their passing.

Have you had any experience with pushy creditors telling you the contrary after a family member’s death?

By Jason Buckland, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...