JustCurious
Thinks s/he gets paid by the post
- Joined
- Sep 20, 2006
- Messages
- 1,396
There is a lot of misinformation and misconceptions on this topic, and I thought I would help to dispel some of it here. This comes up when someone dies with credit card debt and the credit card company then lies to family members by telling them that they are responsible, and they have to sell other assets, etc., in order to satisfy the credit card debt. However, in most cases, this is simply false, and the credit card companies know it, but they lie shamelessly and feed into the common misconceptions that people have.
First of all, let me clarify the situations I am talking about. I am talking about situations where someone has unsecured (credit card) debt in their own name, and ONLY in their own name. No joint accounts. If there is a joint account, then the credit card CAN go after the joint account holder.
Second, IF the person is survived by a spouse AND they lived in a community property state, then the spouse MAY be responsible for the unsecured debt. However, most states are not community property states, and in those cases, the credit card company has no claim against the spouse (remember the first rule above, the account cannot be a joint account). Also, if there is no surving spouse, then it doesn't matter if you are in a community property state.
With the two caveats above, it is absolutely true that when you die, your credit card debt dies with you, and no one else is liable for those debts.
Now, you say, what if the person had assets? Well, the credit card company would only have a claim against assets that pass THROUGH PROBATE. In most cases, assets pass outside of probate. The most common examples are bank accounts or other accounts with beneficiary designations. Those accounts pass to their beneficiaries without going through probate. Therefore, no unsecured creditor has any claim against them whatsoever. Unsecured creditors only have claims aganst assets that pass through probate. But since most people don't (or shouldn't) have a need for probate, then in most cases, unsecured creditors have no claim against anything.
First of all, let me clarify the situations I am talking about. I am talking about situations where someone has unsecured (credit card) debt in their own name, and ONLY in their own name. No joint accounts. If there is a joint account, then the credit card CAN go after the joint account holder.
Second, IF the person is survived by a spouse AND they lived in a community property state, then the spouse MAY be responsible for the unsecured debt. However, most states are not community property states, and in those cases, the credit card company has no claim against the spouse (remember the first rule above, the account cannot be a joint account). Also, if there is no surving spouse, then it doesn't matter if you are in a community property state.
With the two caveats above, it is absolutely true that when you die, your credit card debt dies with you, and no one else is liable for those debts.
Now, you say, what if the person had assets? Well, the credit card company would only have a claim against assets that pass THROUGH PROBATE. In most cases, assets pass outside of probate. The most common examples are bank accounts or other accounts with beneficiary designations. Those accounts pass to their beneficiaries without going through probate. Therefore, no unsecured creditor has any claim against them whatsoever. Unsecured creditors only have claims aganst assets that pass through probate. But since most people don't (or shouldn't) have a need for probate, then in most cases, unsecured creditors have no claim against anything.