Credit Card Debt

What Happens to Credit Card Debt When a Person Dies?

After an individual dies, one of the big questions that comes up from those handling the estate of the deceased is what happens to that person’s debt? These debts can include medical bills, taxes, and credit card debt. One of the main concerns brought up by clients is whether they will be personally responsible for the credit card debt of their deceased relative. The good news is only the estate will be responsible for any outstanding debt and not the family of the deceased.

Whether the person has a will or no will, his or her estate will need to be processed through probate court. If the deceased had a will, he or she will have named a personal representative who will handle the estate, and if the person has no will, the court will appoint someone to administer the estate.

This individual is charged with several different duties. The first of these is to accumulate all the assets and property held by the deceased. Additionally, the personal representative will need to determine what debts were owed by the deceased at the time of his or her death. Many times, these debts will include medical bills, utility bills, mortgage payments, and credit card debt.

This debt belongs to the person listed on the bill or statement, which is usually the deceased. If two spouses are named on a credit card statement and only one spouse dies, the surviving spouse will still be on the hook for payment of the debt. However, if the deceased is the only person listed on the statement, his or her family does not personally have to pay this debt once he or she dies. Instead, the estate will be responsible for payment of the debt.

While the will lists who will receive the assets of the deceased’s estate, the debts owed by the individual who died must first be paid from the estate. Paying these debts first means that whatever the beneficiaries receive will be reduced by that amount, but it does mean that the beneficiaries are not personally liable for payment of the debts.

Following the death of the deceased, the personal representative will send notice of the person’s death to all known creditors, including credit card companies. Creditors have 30 days after receiving notice to file a claim against the estate.

At this point, the personal representative will need to pay the creditors based on debt priority. Florida probate law establishes rules as to which creditors receive priority for payment from estates. The first debts that receive priority are any payments made personally by the personal representative, followed then by payment of the deceased’s funeral expenses. Next priority goes to any federal taxes owed by the deceased, followed by the medical expenses incurred by the deceased within 60 days before his or her death. Florida law also ensures that the surviving spouse or children of the deceased receive a certain amount of money to help pay for living expenses. Following this amount are unpaid child support and business debts. Credit card debt is usually one of the very last debts paid by the personal representative.

A great deal depends on whether the deceased’s estate has enough liquid assets to pay the amount in full. If the estate does not have enough assets left to pay its debts, the estate is considered insolvent. The credit card debt may be written off in full or partially, depending on how much is left in the estate once all priority debts are paid.

One matter to keep in mind is that creditors do not have free reign to all of the deceased’s assets. Specifically, with respect to the deceased’s home, if the home is titled solely in that person’s name, only the mortgage lender has the right to force the sale of the home to pay off debts. If that is not necessary, the personal representative may file an affidavit with probate court claiming that the home was the deceased’s homestead and is otherwise protected.

The fact that the family is not personally liable for the debt does not mean the creditors will not ask for payment, especially if the deceased did not have enough money to pay the debt from his or her estate. It is important that the family members of the deceased know, no matter what the creditor tries to say, they are not liable for the debt.

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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

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