Who Has to Pay Credit Card Debt When Someone Dies?
- Life insurance is an option available to the elderly to pay off credit card debt before it becomes someone else's problem. The website Insure.com suggests purchasing at least enough life insurance to cover all outstanding debts. However, because life insurance rates increase dramatically as people get older, it may not be possible for your parents to pay for the necessary coverage as they advance in age.
- Encourage your parents to sign up for debt cancellation insurance on their credit cards. Debt cancellation programs generally cost less than one percent of the credit card balance each month and enable the debt to be canceled in the event of the cardholder's death.If your parents pay their balances in full each month, they aren't charged a fee. If they tend to carry high balances, though, this can quickly become an expensive option. If you're worried about your parents' credit card balances being a problem after their death, you can offer to pitch in to pay for their debt cancellation policies.
- In the absence of insurance, credit card companies have the right to seek payment from the estate of the deceased. In other words, if one of your parents or someone else in your household passes away, you can be held liable for their credit card balances; the opposite is true in the event of your death. However, this liability is limited to the assets left behind in the deceased's estate. This means that before you can receive any inheritance from a deceased relative, their outstanding credit card debt must be paid.
- After the estate's assets have been used to pay off debts, most credit card companies write off the balance. However, according to MSN Money, many collection agencies purchase these debts and attempt to collect the money from the family of the deceased. You are under no legal obligation to pay your parents' credit card bills after their death, nor are you morally obligated to make payments on behalf of deceased relatives. You should focus your energies on resolving your parents' outstanding secured debts, such as cars and houses, because the bank can take these items back if payments on these accounts are not maintained.
