When a spouse or loved one passes away, the grief can be overwhelming. While the initial priority is always getting your loved one laid to rest, the ensuing weeks bring an entirely new realm of issues. Getting things in order, especially financially, can be difficult and emotionally draining. You are probably not yet recovered from the shock of the loss and now you have to figure out how to settle the estate. While some things are fairly straightforward, other issues, such as credit card debt, are a bit more complex. What happens to credit card debt after death?
When a debt is still active upon the holder's death, the main question that arises is who gets to pay for it? There actually isn't any easy answer to this question. It really depends on your particular circumstances and the laws of the state that the deceased resided in. Many credit card companies will immediately forgive debt when notified that the cardholder is deceased. However, that is not always the case. If your state is a community property state, than the debt is still considered active if the spouse is still living. Even so, specifics vary state to state, and this generalization may not apply at all. For community property states, you have to really do your homework. Even in states that don't have community property laws, if you share a bank account with the deceased, the credit card companies may be able to stick you with the balance.
There are two kinds of consumer debt: secured and unsecured. Credit card balances are of the unsecured type and it is because they are not secured by collateral that the interest rates are so high. Once behind in payments, not only do the interest rates rack up very quickly, the consumer is also hit with late fees, penalty fees and every other fee the creditor can think of. When these fees become the only thing that can be paid off each month, then it is time for real debt help. The danger signals are clearly there.
It's important to understand what assets make up the estate. Some financial products are not included in the assessment of the estate, but rather are passed directly to the beneficiary, regardless of the other claims that can be made. These include things like a 401K, insurance policy or retirement plan. They go straight to the designated heir- no questions asked. In addition, many states protect the family home in the same way. However, there are legal loopholes that may allow creditors to put their finger in the pie, so be aware of all possibilities when it comes to settling the estate.
A secured loan is all about what the borrower promises to give the lender as proof that the debt will be repaid. It may seem reasonable today to put up a house against such a loan, but the unforeseen can happen. Job loss, major illness, divorce or any other number of things can effect future income, and thus the payments. Credit card debt is unsecured. There is no hard asset promised if there is a default on the loan, and there's absolutely no reason to trade one for another in hopes of getting debt relief. Especially when there are other forms of debt help like debt settlement or debt management that both work without a loan and work to actually reduce the total amount of debt owed.
When a debt is still active upon the holder's death, the main question that arises is who gets to pay for it? There actually isn't any easy answer to this question. It really depends on your particular circumstances and the laws of the state that the deceased resided in. Many credit card companies will immediately forgive debt when notified that the cardholder is deceased. However, that is not always the case. If your state is a community property state, than the debt is still considered active if the spouse is still living. Even so, specifics vary state to state, and this generalization may not apply at all. For community property states, you have to really do your homework. Even in states that don't have community property laws, if you share a bank account with the deceased, the credit card companies may be able to stick you with the balance.
There are two kinds of consumer debt: secured and unsecured. Credit card balances are of the unsecured type and it is because they are not secured by collateral that the interest rates are so high. Once behind in payments, not only do the interest rates rack up very quickly, the consumer is also hit with late fees, penalty fees and every other fee the creditor can think of. When these fees become the only thing that can be paid off each month, then it is time for real debt help. The danger signals are clearly there.
It's important to understand what assets make up the estate. Some financial products are not included in the assessment of the estate, but rather are passed directly to the beneficiary, regardless of the other claims that can be made. These include things like a 401K, insurance policy or retirement plan. They go straight to the designated heir- no questions asked. In addition, many states protect the family home in the same way. However, there are legal loopholes that may allow creditors to put their finger in the pie, so be aware of all possibilities when it comes to settling the estate.
A secured loan is all about what the borrower promises to give the lender as proof that the debt will be repaid. It may seem reasonable today to put up a house against such a loan, but the unforeseen can happen. Job loss, major illness, divorce or any other number of things can effect future income, and thus the payments. Credit card debt is unsecured. There is no hard asset promised if there is a default on the loan, and there's absolutely no reason to trade one for another in hopes of getting debt relief. Especially when there are other forms of debt help like debt settlement or debt management that both work without a loan and work to actually reduce the total amount of debt owed.
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