If you think your credit card debt will simply be written off when you die, you’re probably misinformed. Typically, your estate will be used to repay the debt. If you left enough assets behind, repayment won’t be a big issue. But if you died with more debts than the assets to pay them off, your family may have to suffer.
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The matter gets worse for someone who held a joint account with you. Let’s find out why:
Implications for Joint Account Holders
Suppose you’re a joint account holder with another person such as your wife or your eldest child. It’s a common practice for family members to co-sign on their father’s or husband’s credit card account so that tracking expenditures can be easy. When you die, your family members are on the hook for the remaining balances.
Sometimes, joint cardholders don’t even know which credit cards were opened on their profiles, possibly because they were not told by their co-cardholder. Other times, people forget that a joint card account was opened on their name. Thus, it is extremely important to keep track of your credit card reports and get things resolved before a traumatic event such as death or divorce.
However, don’t confuse authorized users with joint credit cardholders. If your child or wife is merely an authorized user on your credit card account, they won’t be liable to repay your credit card debt when you die.
Implications for Authorized Users
While authorized credit card users won’t be on the hook for remaining balances, it doesn’t mean they are free to use the credit after the cardholder’s death. For your information, an authorized user who uses a credit card after the cardholder’s death commits a credit card fraud, whether or not they knew about this. To be honest, the crime is no less than stealing someone’s credit card information or using a card found on the street.
This also applies when you know that the cardholder is near their death and the credit card debt can’t be repaid with the existing estate. This is also considered a fraud, which can put you in big trouble.
Implications to the Beneficiaries
Simply put, beneficiaries are the people benefitting from the assets left-back by the deceased cardholder. They may not be held responsible for the credit card debt, but they might still be worse off as the cardholder’s estate will be used for repayment. It is even possible that all that the cardholder left behind was home, and the beneficiaries get nothing, not even the house, which is taken over by the bank to pay for the credit card debt.
However, unlike a mortgage or a car loan, a credit card loan is unsecured. Therefore, when creditors are prioritized for repayment using the estate, credit card banks will be somewhere at the back of the line, but unfortunately, the beneficiaries are even further at the back.
What to Do When a Credit Card Holder Dies?
When a credit cardholder dies, you need to immediately notify the creditors. Neglecting this important task can lead to more troubles in the long run. Follow these steps to prevent any problems:
Step 1: Prepare Yourself
If you realize that a cardholder is near their death and that you will be representing them after death, prepare yourself. Try and organize their financial accounts and gather all information about their credit card debt. You may even be able to request their credit report if you happen to be their court-certified representative. This should greatly help you identify all the accounts associated with the person’s profile.
Step 2: Never Use the Credit Card After the Cardholder’s Death
No one is authorized to use the credit card that belongs to a dead person. As explained earlier, it is no less than credit card fraud. Thus, make sure you don’t use it yourself, nor allow anyone else to use it, not even to cover the cardholder’s funeral expenses. Try to access all the cards that belong to the deceased individual, including the authorized user cards, and destroy them or store them in a safe place.
Step 3: Acquire Multiple Copies of the Death Certificate
Before you proceed with notifying credit card companies, obtain several copies of the cardholder’s death certificate that you need to present to them as evidence. This will cost you some money.
Step 4: Inform Credit Card Companies
After the death of the cardholder, your primary concern should be to notify the person’s creditors so that the accounts can be immediately closed. If you procrastinate on this, interest and finance charges on the credit card debt may build-up, which means more will be used from the assets for repaying the balances. Also, find out whether the cardholder had opted for any auto-payments for recurring bills such as phone or utilities. Get them canceled at your earliest.
Use a certified mail to notify each creditor so that you have it in the record. Don’t forget to attach a copy of the death certificate when notifying the creditors. If you fail to provide a copy, it will only take more time as they will request one from you before closing the accounts.
Step 5: Contact the Credit Bureaus
Besides the creditors, the three credit bureaus Experian, TransUnion, and Equifax must also be contacted. To prevent the chances of credit card fraud, you must request these agencies to flag the deceased person’s credit report as ‘Deceased. Do Not Issue Credit.’ Also, this will prevent any further build-up of the credit card debt.
Step 6: Distribute Payments to Creditors
Before making any payments to repay the credit card debt, you are required to post a public notice of the person’s death and wait for all bills and creditors to come in. Some aggressive creditors might jump in and want to collect their payment first. No matter what, don’t allow individual creditors to jump ahead in line. Be sure to request proof of claim for the estate and then proceed with making payments.
Final Thoughts
Repayment of credit card debt after death can be a hassle, especially if it involves handling too many creditors. To simplify the complexities involved, reach out to an estate attorney.
