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Credit Card Debt Help - What Happens to One's Debt After Death?

When a spouse or loved one passes away, the grief can be overwhelming. While the initial priority is always getting your loved one laid to rest, the ensuing weeks bring an entirely new realm of issues. Getting things in order, especially financially, can be difficult and emotionally draining. You are probably not yet recovered from the shock of the loss and now you have to figure out how to settle the estate. While some things are fairly straightforward, other issues, such as credit card debt, are a bit more complex. What happens to credit card debt after death?

Who is Responsible?

When a debt is still active upon the holder's death, the main question that arises is who gets to pay for it? There actually isn't any easy answer to this question. It really depends on your particular circumstances and the laws of the state that the deceased resided in. Many credit card companies will immediately forgive debt when notified that the cardholder is deceased. However, that is not always the case. If your state is a community property state, than the debt is still considered active if the spouse is still living. Even so, specifics vary state to state, and this generalization may not apply at all. For community property states, you have to really do your homework. Even in states that don't have community property laws, if you share a bank account with the deceased, the credit card companies may be able to stick you with the balance. Responsibility for the debt after the card holder's death can also come into play if you have a financial relationship with the deceased- for example, you are actually listed on the card account as a co-signer. Finally, in the event that the deceased has assets, they will be placed in the estate until everything is settled. The credit card companies have the option to make claims upon that estate in order to be compensated for the credit card debt.

Making Claims on the Estate

It's important to understand what assets make up the estate. Some financial products are not included in the assessment of the estate, but rather are passed directly to the beneficiary, regardless of the other claims that can be made. These include things like a 401K, insurance policy or retirement plan. They go straight to the designated heir- no questions asked. In addition, many states protect the family home in the same way. However, there are legal loopholes that may allow creditors to put their finger in the pie, so be aware of all possibilities when it comes to settling the estate.

Fighting a Creditor

There are plenty of circumstances where you may be required to fight an overly aggressive credit card company or collection agency. The first thing you need to do is determine exactly what your rights are and what your legal obligations may be in relation to the debt of your deceased loved one. Don't ever take anything that the creditor tells you at face value. Simply put, they want their money and will often do whatever it takes to get it- including being dishonest about the extent of your responsibility. If you do determine that you have no legal obligation to repay the debt, fight the company as hard as you can. They may even resort to tactics like reporting you as delinquent on your credit report. However, if this was done outside the legal parameters, you can contest that and have the report adjusted. Whatever you do, don't back down. 

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