Although it is a time that may be difficult for many, it’s worthwhile to pay attention to debt, in particular credit card debt, upon the passing of a loved one. The Credit CARD Act of 2009 attempted to provide some assistance in terms of the speedy and fair settlement of estate-related debt. The law requires credit card companies to respond to requests for final bills in a timely manner, cannot charge additional interest if the final bill is paid within 30 days, and cannot impose late fees or similar charges while the administration process is pending. As a practical matter however, there are still some simple things to remember that can save you both money and hassle after the death of a family member.
[Related article: How Can I Pull a Deceased Family Member’s Credit Report?]
First, you must determine what debt existed at the time of the borrower’s death, including to whom such amounts are owed, and precisely what those amounts are. The next thing to do is be sure that the executor of the estate or the estate administrator contacts the credit card companies as soon as possible, to take advantage of the protections of the CARD Act. This is very important, not only to stop the continuing accrual of interest charges and fees, but also to be sure that the debts do not get referred to a third party collection agent, who is far less likely to be understanding or to follow the law scrupulously than the credit card companies themselves.
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Next, and often most importantly, you must determine exactly who owes the money. If your spouse dies, it does not automatically mean that you are liable for unpaid credit card bills; conversely, even if you are not liable, credit card companies and third-party debt collectors may—and often do—attempt to collect the money from you or anybody else involved. Generally speaking, if your name is not on the account with your spouse, and you do not live in a community property state (Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin) you will not be personally liable for the credit card debt of your spouse. Of course, the estate will remain responsible for those debts, to the extent that there are assets to cover them. Remember that credit card debt is unsecured, meaning that secured debt like mortgages or car loans will be prioritized first. The credit card companies will be paid before there is any distribution to inheritors, but if there is no money in the estate above secured debt, the credit card companies will be out of luck.
Unfortunately, the sadness that surrounds the passing of a loved one does not mean that you will be spared from aggressive collection attempts, warranted or otherwise, and actual fraud. However difficult it may be, it is important to be sure that credit card debt is legitimate and accurate as soon as possible, and if you are not liable for those debts, be certain to get yourself out of the middle of the process as soon as possible. As a rule, state law requires that creditors and their collection agents must deal with the executor of this the estate, and the protective provisions of the CARD Act can be far better utilized once direct contact between creditor and executor has been made.
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One final piece of advice: If you are both the executor of the state and the spouse of the deceased, but you are not personally responsible for the debts in question, behave like an executor and not like a spouse. Protect the assets of the estate which may well eventually become yours, and show no tolerance at all for deceptive or abusive tactics.