What happens to credit card debt when you die

Losing a loved one—whether it's a spouse, parent, or sibling—is never easy. There can be a lot of emotions to unpack. It’s a difficult time for everyone involved, and no one wants to worry about finances during a period of intense grief. Unfortunately, credit card debt is one of those financial issues that might come up after a death. 

Dealing with debt after a death can be complex and challenging, partly because the answers vary depending on where you live and what your relationship was to the deceased. Here are some basic guidelines to help you understand what could happen, whether you’re planning ahead or coping with a loss right now.

Who is responsible for credit card debt after death?

When someone dies with debt, those debts usually become the responsibility of their estate. An estate just means anything a person owned—or owed—at the time they passed away. 

Probate is a legal process in which someone's estate is settled after their death. As part of this process, the designated person in charge of financial matters—the executor—must let the deceased person's creditors know that they've passed away. It's then up to the creditors to make a claim against the estate for what's owed. 

Sound confusing? Here's the tl;dr version. 

When someone dies, you generally won’t be responsible for paying their debts.

But you do remain responsible for debts after your loved one’s death if you were already legally responsible for those debts. 

Joint accounts, co-signers, and community property states

Debts owed by more than one person, whether it's a joint or co-signed debt, are the responsibility of both borrowers. That means if one borrower passes away, the surviving borrower would still have to pay. (The same rule applies if there are more than two borrowers.)

What kind of debts does this rule apply to? Quite a few, including:

• Co-signed private student loans

• Co-signed or joint car loans

• Joint mortgages

• Joint credit card accounts

• Personal loans with a co-signer or co-borrower

Even if your name isn’t on the debt, you can still be held responsible for it if you're married and live in a community property state. Community property states treat debts that occur during marriage as belonging to both spouses. There are nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 

Are authorized users responsible for debt when someone dies?

Authorized users have access to someone else's credit line. For example, an authorized user on a credit card can make purchases with another person's credit card account. 

When someone is listed as an authorized user, not a co-signer or joint account owner, they're not responsible for any debt associated with the account. If the primary cardholder dies, the credit card company can't come after you for the debt. 

However, you'd want to stop using the card once you find out that they've passed away. At that point, any purchases could be considered fraudulent. 

Read more: Is credit card debt forgiveness possible?

Is a beneficiary or executor responsible for debt when someone dies?

It's the executor's job to settle someone's estate after they die. Unless the executor was a co-signer, joint borrower, or the deceased person's spouse, then they aren't responsible for any debts that were left behind. 

Beneficiaries are people who benefit financially from someone's passing. For example, the beneficiary to a life insurance policy can collect a death benefit (the life insurance money) once the insured person passes away. 

A beneficiary wouldn't be responsible for a deceased person's debts unless they were a co-signer, co-borrower, or a spouse who lives in a community property state. And creditors can't go after certain kinds of assets that beneficiaries might inherit, such as a 401(k), to collect unpaid debts.

Are family members responsible for deceased credit card bills?

Family members wouldn't have to pay credit card bills when someone passes away—unless they were listed as a joint account owner or they were married and live in a community property state. 

Creditors could try to collect the debt from the deceased person's estate. But family members wouldn't be responsible for paying any money to the debt directly. 

Six steps to take after a cardholder dies

Once you've had time to do some initial processing of a loved one's loss, you can turn your attention to handling credit card debts. Here are six key steps to take when someone passes away.

1. If you're an authorized user, stop using any cards that you have access to. 

2. Round up any cards from other authorized users who may be listed on the deceased’s accounts. 

3. Notify the credit card companies that the person has passed away. 

4. Continue making on-time payments to any joint credit card accounts that are also in your name, or accounts that you co-signed.

5. Consider carefully whether you want to close joint accounts or continue using them. 

6. Contact the three major credit bureaus to notify them of the death. Flagging your loved one’s credit reports as “deceased” can prevent new accounts from being opened in their name. 

Which assets are protected after death?

Creditors can go after someone's estate to collect on debts when they pass away. But it's not a free-for-all, and there are some assets that creditors can't touch. 

Creditors can’t try to take:

• Life insurance. Life insurance policies usually have a named beneficiary. Unless the policyholder names their estate as the beneficiary, then creditors can't collect on the death benefit. 

• Retirement accounts. Retirement accounts also allow you to name a beneficiary. If the deceased person had a 401(k) or IRA, for example, then the money in those accounts would be protected from creditors. 

• Trust funds. A trust allows you to transfer assets to the control of a trustee. It's the trustee's job to manage them on behalf of your beneficiaries. You might set up a trust to protect assets if you have a large estate. 

• Transfers or gifts to minors. UTMA and UGMA accounts are set up to hold gifts and transfers to minors. Money set aside for minors through a UTMA or UGMA account belongs to the beneficiary, not you. That means creditors can't go after it to pay outstanding debts. 

Creating an estate plan can make it easier to avoid a situation where someone might get left with another person's debt down the line. 

For example, you might sit down with your aging parents to talk about setting up a trust, or to find out who's named as beneficiary for their life insurance policies and retirement accounts. Or, if you don't want to leave your kids with debt, you might work with an attorney to create an estate plan so there are no bills left behind. 

Managing credit card debt 

There are many ways to pay off credit card debt. Here are a few options:

You can follow your own aggressive debt payoff strategy. Pick a method, like a debt snowball or a debt avalanche. Use an app to help you get out of debt and track your progress. 

A debt management plan (DMP) can help you get on track with a structured plan for paying back all of what you owe. You'd work with a nonprofit credit counseling agency to create a plan and make a single payment each month. Debt management plans typically last 3-5 years and generally require that you stop using credit while you’re in the plan.

If you can’t afford to pay back all of what you owe, you could also try debt resolution. When you resolve debts, you essentially negotiate with your creditor to accept less than the full amount you owe. Negotiating debts could help you become debt-free in less time and save money in the long run compared to other payoff strategies. You can resolve debts on your own or hire a professional company to help you.