Debt inheritance sounds bad when it happens to people that supposed to be the heir of credit cardholder. However, that is not true because the debt cannot go into the next heir. When you decided to take credit card, there was agreement between lender and primary card owner. This kind of agreement is similar to loan or mortgage that only affects both parties. What happens to credit card debt when you die? The answer for this question will be explained at following sections.
Credit Card Debt after the Owner Dies
Credit card is common method to pay almost anything, even for paying mortgage. In general, bank or credit card issuer lend money to the card’s owners then charge them with regular payment monthly plus interest. This is why the debt becomes significant because the owner cannot control what to purchase or pay using this card.
So, what happens to credit card debt when you die? The estate will handle everything. Keep in mind the agreement only implied two parties, lender and card owner. Be careful when distinguishing card owner and card holder. As you know, primary owner may authorize another holder such spouse, children, or anyone. However, the agreement only involves primary owner because he signed.
Every asset from card owner will be put into settlement until the debt is pay off. The asset includes property, card, land, jewelry, watch, or anything that’s capable to fulfill the debt. In practical situation, those assets are valued as source of money. Besides tangible asset, lender will go to intangible ones, such stock or bank saving. These kind of assets are preferable because easy to value then you can put into credit card debt account when you die.
The procedures depend on law in each state or agreement. Having debt card debt is high risk for lender and borrower. Well, death is inevitable, but lack of preparation gives much trouble in the future. Legitimate heir does not have obligatory to pay off all debts. However, any asset should be put into settlement before distributed into your heir. So, what happens to credit card debt when you die? Well, all debts will be paid by yourself.
As it mentioned above, the estate is primary source to settle everything on credit card debts. There are some options that can be considered. You can use money from retirement or life insurance to cover debts. This thing seems a little bit complex because it requires early agreement. Life insurance is financial coverage when the death comes based on specific term. Moreover, insurance company puts credit card debt into account and decides to charge more.
Sometimes, the spouse will pay everything because he or she has used the same credit card. The second holder may not be necessary to do this thing. However, it is about moral conduct because it takes the same benefits from credit card. Of course, this is what lender or bank chooses due to simple and easy thing to cover.
What happens to credit card debt when you die and your asset cannot cover it? This is intriguing question to answer. In this situation, the debt is declared as business loss. Therefore, the bank or credit card issuers will write off this debt because you can do nothing anymore.