The widespread use of credit cards means that almost everyone has at least one piece of plastic in their wallets. If you are dealing with the death of a loved one, though, the question might arise as to how to handle that type of debt. To find out how credit cards are treated in probate court, read on.
Credit Cards Are Unsecured Debt
A mortgage is not an unsecured debt because the real estate itself secures the loan. The same thing goes for auto loans that are secured by the vehicle. With credit cards, though, nothing secures it. That does not mean that the credit card balances that persist after a death don't have to be paid.
Paying the Bills of the Estate
Probate is not just about certifying wills and approving inheritances. One of the most important functions of probate is to make sure the bills of the deceased are paid. The way that is accomplished is by appointing a personal representative to oversee the estate for the probate court. It is the responsibility of the personal representative to contact the credit card companies after a death and inform them. The burden then rests with the credit card issuer to take action and notify the personal representative of the balance due. Once a credit card account holder dies, no interest, fees, or penalties can accrue.
How to Pay Credit Card Debts
The loved ones of the deceased are never responsible for paying the credit card debts of the deceased – instead, any funds must come for the estate. That means the bank accounts or other assets of the deceased can be used to pay the bills. The way probate works, however, means that credit card bills may never get paid. Probate (and the personal representative) are charged with paying certain creditors first. Taxes, for example, have to be paid before other bills. Credit cards are often too far down on the list of bills to be paid to rate a notice. When they are not paid, the creditor has no choice but to write them off. They cannot sue the estate for unpaid credit card bills, and they cannot take property.
What Else to Know
There are more exceptions and considerations to understand:
If the credit card was a joint debt, the debt is unchanged and must be paid as agreed.
In some states, the surviving spouse might be responsible for some or all of the credit card debt.
Your probate or estate attorney can advise you on what debts should be paid and when.
Only estate assets that fall under probate should be used to pay credit card debts. If a trust, special account ownership designations, or real estate deed titles were used, anything addressed is not part of the estate and cannot be touched by creditors of any kind.
To learn more, speak to your probate lawyer.
Share19 November 2019
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