Settling Credit Card Debt After Death

Credit cards have become very popular today, as they are convenient to carry and make payments and give the cardholder ability to purchase items instantly than wait for the cash to come by. This trend means that sometimes, when people are not careful with their credit, they end up having credit all their lives. Some even die without being able to pay off their credit card debts.

It has become very easy to apply and get a credit card due to the various kinds of cards available. However, this can and does lead to people acquiring many credit cards who then find themselves in debts much beyond their payment limits. Such cardholders may therefore fall behind in their payments and ruin their credit rating. This means that they will be considered high-risk customers by most of the lenders and will be denied loans or any other form of credit in future.

A credit card holder has the option to pay the full amount due or carry over the balance to the next month, known as revolving credit. Cardholders who have accumulated a lot of debt often choose to make the minimum required payment. Though this practice prevents them from being defaulters, they are charged significant interest rates on the carry over balance. Further, if due to several due payments, the customer misses the payment for any month, the interest charged is even higher. The credit card companies even have the right to increase the applicable interest rates in case the customer is late in payment of balance amount. This means that the debt incurred will not reduce, as the payments are applied usually to the interests and not to the principal amount. This becomes a vicious cycle for the cardholder and it requires a lot of effort, spending discipline and time to catch up with the debt.

After a cardholder dies, the credit card companies send collection letters to the family or other relations to see if they can recover the money from the estate of the deceased. If there is no estate left behind by the person, then the company cannot legally force the family or other survivors to pay the debt of the deceased. All that the family has to do is send a copy of the death certificate to the credit card company.

Though under the federal laws, no one can inherit a debt, inheritance laws vary by state. States where "community family property" laws or "joint and several" provisions are practiced, the heirs to an estate may be considered responsible for the debts of a deceased person. In many cases, being an heir is more important than being a relative of the deceased. The reason behind this is that the person, who is responsible for the estate, must also be responsible for the liabilities.

If two people had jointly taken the credit card, then the other person is responsible for the debt. However, the person is responsible for the debts that he or she contractually created. Usually the will of the deceased governs his or her financial affairs. Generally a will only disburses assets and not debts, but before passing on any asset, all the debts must be paid. Therefore, the assets are sold to recover the debts and then the remaining assets are passed on to the beneficiaries of the will.