Can You Inherit Credit Card Debt?

Although it’s not pleasant to think about, whether you might inherit credit card debt from your deceased parents or partner is a question that does come up. There isn’t a simple yes or no answer, but depending on where you live, you may be responsible for certain kinds of debt that belonged to your parents or partner.

Most people—about 73%—die with some form of debt, and more than half of Americans think they’ll leave some debt behind. 

Here’s a look at some debt numbers for credit card debt and how much debt people die still owing (including mortgage debt).

Figures from Experian and Prudential. 

Here is a brief overview of how debts are handled after death.

Who Is Responsible for Credit Card Debt When Someone Dies?

Credit card debt doesn't disappear just because the cardholder died. The credit card company can still try to collect any money that's owed. 

The law gives creditors some options to try to collect, but the specifics depend on relationships and authorizations. After a death, the following people could be responsible for credit card debt after a death:

• Co-signers or joint account holders. If the credit card was a joint account, the surviving co-owner will usually be responsible for the balance. The same goes for anyone who co-signed for the debt. Not all credit card companies offer joint or co-signed accounts, but when they do, they’ll typically turn to those individuals for payment. 

• Spouses in community property states. Just nine states have community property rules. In these states, surviving spouses may be responsible for credit card debt. This means creditors can try to collect outstanding credit card debt from the shared marital assets. 

• The estate. Card issuers can also legally collect from the deceased cardholder's estate—the assets that the deceased person left behind. Someone’s estate includes money in bank accounts or other valuable assets. 

Cosigners or joint account holders are responsible for credit card debt after a death, but authorized users on the account usually aren’t. Authorized users will likely be responsible for debts they incur if they keep using the card after the primary owner's death, but they’re not responsible for any outstanding balances at the time of death. 

Community property laws don’t apply if there’s no co-signer or joint account holder. If the estate has no assets, there’s no way for a credit card company to recover the balance. In that case, the lender typically has to write off the debt.

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Credit Card Debt and Estate Law

It's always best to talk to a licensed attorney in the local area to understand the rules for credit card debt after a death. However, it’s generally the case that when someone passes away, their estate is responsible for paying off any remaining credit card balances and other debts. 

If the deceased person has more debts than assets that could be sold, the creditors may be out of luck and will likely have to take a loss. 

Still, that doesn’t mean the deceased person's debt won't affect surviving loved ones. 

While you may not find yourself in need of credit card debt relief if a parent or spouse dies with debt, your inheritance could still be impacted if you were a beneficiary. That's because debts are typically dealt with first before any inheritance is distributed.

For example, most states' laws require that payments be made in this order from the estate:

• Secured debts (such as a mortgage or car loan)

• Unsecured debts (such as credit card debt)

• Inheritances as defined by a will

If most or all of the money goes to creditors, you won't end up inheriting as much as you might have expected or even anything at all. 

If You're a Co-Signer or Joint Cardholder

Not all credit cards allow co-signers or joint cardholders, but some do. If you co-signed for a credit card and/or are a joint cardholder with another person, you are equally responsible for any credit card debt from that account—including if your co-signer passes away. Co-signed credit card debt doesn't disappear when the joint account holder dies.

Parents often co-sign with children who are just starting out (to help them learn about finance), and adults sometimes co-sign for their elderly parents to help them keep track of their expenses. If that's the case, be sure you understand the legal obligations in case the primary accountholder dies. 

If you’re a co-signer,  keep tabs on your credit score and report and try to make sure that any accounts you co-signed aren't hurting your score due to late payments or non-payment.

Note the difference between a co-signer, whose credit was considered when applying for the card, and an authorized user who the primary cardholder added to the account as a person who could use the card. If you're an authorized user, you aren't responsible for the debt of the main account holder.

Types of Debt You Can Inherit 

If your loved one passed away with debt, they may have had other loans beyond credit cards. If that's the case, get to know the rules for other kinds of debt that they died with. Here are the rules for other loans: 

• Home equity loans on inherited houses. Home equity loans are secured debt, and the house guarantees the loan. The debt has to be paid if you want to keep the house. You could take over payments, pay off the debt in full, or refinance depending on your financial situation and the lender's policies.

• Co-signed and joint debt beyond credit cards. Co-signers are responsible for all co-signed debt. This is true no matter the type of debt, with the limited exception of certain student loans. 

• Medical debt. Creditors could try to collect from a co-signer or the estate. 

• Student loan debt. Federal student loan debt is discharged upon the death of the primary borrower. For private student loans, co-signed debt may be discharged by the private lender but policies vary by lender and, in some cases, the lender will try to collect from co-signers or from the estate.

• Other debt subject to community property rules. In community property states, surviving spouses are typically responsible for debt acquired during a marriage even if they were not co-signers. 

Community Property States and Inherited Debt

A small number of states ]have community property laws. Under these laws, all assets and debts acquired during a marriage belong to both spouses. These rules come into play during divorce and if one spouse dies with debt. 

In community property states, if your spouse dies with credit cards or with other debt, you may be responsible for repaying what’s owed even if you weren’t a co-signer, joint borrower, or on the cardholder agreement or loan paperwork. The creditor could potentially sue you to try to collect any debt considered to be community property as long as the debt was acquired during the marriage.  

Here are a couple of examples of debts that would likely be considered community property:

• $1,000 credit card charge for groceries. Since you were married at the time, the debt would be considered community property and you’d be equally responsible, even if you personally didn’t buy the groceries. 

• $5,000 bill for a roof repair. The debt covered a roof repair for your joint home, so that debt could be considered community property.

These states have community property laws: 

• Arizona

• California

• Idaho

• Louisiana

• Nevada

• New Mexico

• Texas

• Washington

• Wisconsin

Specific rules vary by state, so if you have concerns about whether you are responsible for your spouse's debt in a community property state after they died, it’s best to consult with a lawyer.

Using a Card After the Cardholder’s Passing

If you're a joint cardholder or co-signer on the credit card account, you can likely continue using the account as normal. It’s best to continue making payments on time as usual.

If you're an authorized user, immediately stop using the card. Continuing to use a credit card after the account owner’s death is considered credit card fraud, even if you use the card to pay for funeral expenses or related bills.

The death of a parent can sometimes mean financial turmoil for surviving relatives, but just as in any money situation, addressing the situation upfront could save you a great deal of stress down the road. Generational debt has the potential to get messy. It’s best to consult with an attorney who can look at your situation and help you decide what your next steps should be.

Can Creditors Claim Assets From the Estate?

Yes. When someone dies, their debts don’t disappear. Creditors can file a claim against the deceased's estate to try to collect what is owed. 

You don’t have to be wealthy to have an "estate.” An estate simply includes everything of value that the person owned, such as their: 

• House

• Car

• Bank accounts

• Personal belongings in some cases

As the estate is settled, meaning the deceased person’s financial affairs are dealt with, debts generally get paid off with the estate's funds before any money or property is distributed to heirs.

If you're dealing with this situation, first figure out what debts and assets are in the estate and who the creditors are. Consider consulting with an estate attorney who can help you navigate the details.

What Assets Can Be Protected From Creditors?

A creditor can try to collect from an estate, but certain assets are generally protected and won’t be lost to creditors. Some of examples of assets that could potentially be protected under certain circumstances are:  

• Assets transferred through trusts. Trusts allow assets to transfer through the trust administration process instead of probate. However, the level of protection depends on the type of trust. Irrevocable and spendthrift trusts can offer strong protection from creditors, while revocable trusts generally don’t shield assets from creditor claims.

• Retirement accounts. Protected retirement plans such as 401(k) accounts can be transferred to designated beneficiaries outside of probate and are protected from creditor claims. When an IRA is inherited, whether it’s a Roth IRA or a traditional account, there’s no protection from creditors, and the account could be vulnerable to the deceased's creditors

• Life insurance for beneficiaries. When a life insurance death benefit is paid directly to beneficiaries, creditors can't usually try to take the money to repay debts of the deceased.

How to Protect Yourself From Inheriting Debt

It's tough enough dealing with the loss of a loved one without worrying about inheriting their debt. Here are a few tips to help you protect yourself:

• Find out whether you’re in a community property state. If you’re not, you and your spouse could keep separate individual debt accounts to protect each other from responsibility for those debts.  

• Buy life insurance that your heirs could use to pay off your debts when you die. If you have a home you want your heirs to keep, but there’s still a mortgage, buy life insurance in an amount big enough to pay off that loan. Life insurance can also be a welcome financial safety net in a community property state, since there’s no way to keep your spouse’s debts separate.

After a death occurs, if a creditor calls you about the deceased's debt, don’t let them make you feel pressured. Unless you’re in a community property state and your spouse dies, you're generally not personally responsible for someone else’s debt unless you co-signed or you’re a joint account holder. 

Even while you’re still working out who’s responsible for a debt, communicate early and clearly with the creditors. Let them know about the passing. Seek legal advice to understand your rights and responsibilities fully. And document every step of the process.

Dealing with Debt Collectors After a Death 

When debt collectors contact you after a death, keep in mind a few things:

• Don’t assume the debt is yours. If you didn’t co-sign, aren't a joint accountholder, and don’t live in a community property state, the debt isn’t yours. Tell the collector that your loved one has died, you aren’t responsible, and they’ll need to reach out to the personal representative of the estate. 

• Ask for proof of the debt. If creditors are trying to claim you are responsible, or if you are the personal representative of the estate, you can request written details about the debt. In general, collectors either must provide details about the debt during your first conversation or within five days from the time they contact you. This usually comes in the form of a written validation notice. 

• Dispute the debt. When you receive a validation notice and you then dispute the debt in writing within 30 days, collectors have to stop contacting you until they have validated the debt in writing. 

• Limit when and how debt collectors contact you. You can tell collectors both how to contact you and not to contact you at specific times or places. You can also send a written request to discontinue all contact -- although creditors will still have a right to file a lawsuit against the estate. 

The Fair Debt Collection Practices Act outlines many of your rights, and creditors that violate the rules could face penalties. If a collector is being aggressive or you suspect the collector isn’t following the rules, get legal help—especially if they’re threatening legal action against you for debts you don't think you owe.

The Consumer Financial Protection Bureau has many resources to help you understand your rights and make complaints about debt collectors. You could use these to understand whether a collector is acting properly.

If you were a co-signer, joint account holder, or have community property debt that you actually are responsible for but are struggling to pay after your spouse's death, there may be help available. Arm yourself with the following information:

• What is debt relief?

• How Freedom Debt Relief works

As a professional debt settlement company, Freedom Debt Relief helps you work with your creditors to find a solution to your debt issue. 

Steps to Take if You Are the Executor

If you’ve been named the executor of an estate, it's a big responsibility, but you can handle it. The exact actions you need to take vary by location, but here are some steps that are usually required: 

• Notify creditors of the death. You need to provide a death certificate, and you may also have to fill out some paperwork.

• Close accounts. You might have to contact credit card companies, banks, and other financial institutions. Ownership of joint accounts typically goes to the other account owner whether it’s a debt or an asset, but the account number might change. Authorized users aren't responsible for the primary account holder’s debt.

• Pay off the deceased's debts using the estate’s funds. This is a time when it’s advisable to get guidance from a qualified attorney, because certain debts have priority. Medical debts usually get paid first. Co-signed debts become the responsibility of the living cosigner, so if the estate can pay them off, you could avoid passing the debt to the cosigner.

If there isn’t enough money in the estate to pay off all the debts, different things happen, depending on what kind of debt it is. Unsecured debts like credit cards may go away, but not if you’re in a community property state and the deceased was your spouse. For secured debts like a mortgage or a car loan, you may have to pay off the debt or lose the asset.

Last, take care of yourself. Dealing with a death is stressful. Lean on friends, family, or professionals for support. 

6 Steps to Take After a Cardholder Dies

Whether you are the family member of someone who has died with debt or you are the personal representative or executor of an estate, there are certain steps that you may want to take after your loved one has died. Here's what you need to do:

1. Organize financial documents. Gather bank and credit card statements, a copy of the will, and any other financial paperwork you can get. Surviving spouses and personal representatives or executors can request copies of the credit reports for the deceased person. These will list all accounts in the deceased person's name, making it easier to find them. 

2. Get copies of the death certificate. You’ll need these to send to credit card companies and other financial institutions, as well as to life insurance providers. It’s recommended you ask for 10 to 20 copies, and a few extra for emergencies and photocopies.

3. Stop using credit cards. Authorized users should stop using credit cards. Surviving spouses and/or personal representatives can also turn off automatic payments. This doesn't apply to cosigners or joint account holders, though, as they can continue using the accounts. While ownership of joint accounts typically goes to the other account owner whether it’s a debt or an asset, the account number might change.

4. Notify creditors of the death. The personal representative or surviving spouse can alert creditors to the fact the deceased passed away. You need to provide a death certificate, and you may also have to fill out some paperwork.

5. Request a credit freeze. Don’t let scammers try to use the deceased person's Social Security number. Scammers sometimes read obituaries scouting for identities to steal. Put a credit freeze on the deceased person's credit with all three credit bureaus—Equifax, Experian, and TransUnion—to prevent this.

6. Pay off the deceased's debts using the estate’s funds. This is the executor's job. Executors should get guidance from a qualified attorney, because certain debts have priority. Secured debts are usually paid first, followed by administrative costs, and then medical debts. Co-signed debts are the responsibility of the living co-signer, so if the estate can pay them off, that could ease the living co-signer's repayment burden.

Here’s what happens if there isn’t enough money in the estate to pay off all debts. Unsecured debts like credit cards may be discharged, unless you live in a community property state and the deceased was your spouse. For secured debts like a mortgage or a car loan, you may have to pay off the debt or lose the asset.

Executors and loved ones of someone who dies with debt should consider getting legal help to better understand their rights.

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