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Here’s what happens to credit card debt after death

Dealing with a loved one’s finances after they have died can be upsetting and stressful. However, it doesn’t need to be confusing. If you are wondering what happens to someone’s credit card debt once they are deceased, then let us guide you through it.

Does it go away?

This is not a simple yes or no answer. Any outstanding debts – including credit card debts – left by someone who has died become a liability on their estate.

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When we refer to a person’s ‘estate’, this is any:

  • Money they have in bank accounts or savings
  • Assets like a car, caravan or jewellery
  • Property they own

The executor of the estate (or the administrator if no will has been put in place) is then responsible for paying any outstanding debts from the value of the estate. However, if there is insufficient money or assets to cover all outstanding debts, they must be paid in priority order:

  1. Secured debts such as mortgages.
  2. Priority debts such as income tax or council tax.
  3. Unsecured debts like credit cards or loans.

As you can see, credit card debt is one of the last debts to be covered. If there are not enough funds to cover this after other debts have been paid, the estate may be subject to an ‘insolvency administration order’. This is essentially bankruptcy for a deceased person’s estate. If it reaches this stage, then any outstanding credit card debts are likely to be written off.

Who’s responsible for it?

One of the main worries surrounding debt left behind by someone who has died is whether the debt will be passed on to someone else. In the case of credit card debt – which is classed as individual debt – any surviving spouse, civil partner or relative will not be required to pay it from their own pockets. Even if you were an ‘additional cardholder’ on the account, you will not be responsible for the debt.

However, there are a couple of scenarios to be aware of.

Firstly, as the estate will be used to pay off any outstanding debts, if you jointly owned property with the person who has died you will need to clarify whether this was under a ‘joint tenancy’ or as ‘tenants in common’. If a ‘joint tenancy’, the property will automatically pass to the surviving owner and creditors are unable to force the sale of the property.

However, if you were ‘tenants in common’ and the decreased had a separate share in the property, creditors could force the sale of the property in order to recover their money.

Secondly, as the executor of the deceased’s estate, you might consider placing a deceased estates notice in the local paper. While you may think you know what outstanding debts there are on the estate, there may be some unknowns.

The notice in the paper gives creditors the chance to come forward. There is no legal obligation to do this. However, if you distribute the estate and then a creditor comes forward, you may be personally responsible for the debt. The deceased estates notice protects you from being liable for any unidentified creditors.

How does it get paid?

Any outstanding credit card debt must be paid from the money and assets from the deceased’s estate. But how does this actually happen?

You can cover any funeral expenses and costs involved in the administration of the estate before paying any debts. Then you will need to have a probate or grant of administration in place so that you can start to pay off the debts in priority order. 

First things first, it’s best to contact creditors and inform them that the person has died. It’s a good idea to note who you have contacted and when in order to keep track of things. You can ask for a letter or statement showing any outstanding balances. Once you have done this, creditors should stop taking regular payments from the deceased’s account until the debt has been settled in full.

After repaying all outstanding debts, you can distribute any remaining funds to heirs of the estate.

Final thought

There’s undoubtedly a lot to take in when dealing with credit card debt after the death of a loved one. If you are looking for more personalised or detailed advice on any of the aspects covered here, then non-profit debt charities, such as Step Change, are well worth exploring. 

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