Debt and credit card cannot be separated because they entangle each other. In general, you need to pay regular payment since the credit union or bank lends money. As similar to other loans, credit card also has interest alongside payment itself. However, death is uncertain factor that affects significantly to credit card holder. What happens for credit card debt after death?
For some cases, people die but still have debt from credit card. This situation affects their heirs, estate, and credit card issuers. In order to handle this situation properly, each party should follow action based on legal act or regulation. Death is unpleasant event, but it can be predicted, though not accurately.
The Debt after Credit Card Owner Dies
First thing to know is this debt belongs to personal loan. Credit card issuer and owner sign contract as mutual agreement. He has right to pay, purchase, or do anything using credit card. On the other side, credit card union or issuer has obligation to lend money. As personal loan, this debt is high risk and credit card debt after death requires proper handle.
The credit card owner may have estate such as property, bank saving, car, jewelry, or anything as asset as source of payment for credit card debt after death. After he dies, his heir will receive those estates as inheritance. However, credit card issuer has the right to take action for obtaining asset to fulfill the debt. Before all assets are distributed, the debts have to be paid completely. It seems the heirs inherit debt and have obligation to pay off. However, those credit card debts are only eligible to pay only the estate from credit card owner.
Moreover, bank will go to the simplest and fastest way to have money such as from saving, card, or other possession such as watch and jewelry. They are easy to collect and turn into cash at short time. The credit card issuers do not want to take risk for long process for completing credit card debt after death.
The last resort is property, such as house, building, and land. Those things are not easy to be the source of money to pay off all debts. There are regulations to follow and procedure to take that spends much time. If the easy assets cannot fulfill the debt, bank does not have much choice to choose. The only purpose for credit card debt after death is the complete pay off.
The worst situation for bank or credit card issuer is not about paid off, but the asset is not enough to cover principal debt. As you know, this loan is very high risk because borrower does not give collateral. That is why interest rate is higher. Credit card debt after death turns into business loss because there is not enough money to pay the entire debts.
Another way to cover this debt is from life insurance. If the card owner has it, bank still has right to get this insurance. However, it depends on term of agreement between card owner and bank. Life insurance is the last thing to suggest for credit card debt after death.