Handling Credit Card Debt After the Death of a Spouse

Handling Credit Card Debt After the Death of a Spouse

August 19, 2020         Written By Tracy Farnsworth

The grief following the death of a spouse or partner can be overwhelming. In fact, the death of a spouse holds the number one spot as the most stressful life event per the Holmes-Rahe Stress Inventory by The American Institute of Stress.

The last thing you want is to have that stress and grieving process interrupted by creditors looking for repayment of credit card debt. To know if you are responsible for any of that debt as the surviving spouse, it’s important to look at the type of account and your state laws.

Responsibility Often Falls to the Estate’s Executor

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When the credit card debt is only in the deceased spouse’s name, you’re probably not responsible for the repayment of that debt. Whether you live in a common-law state or a community property state determines this. In a common-law state, it’s up to the estate to pay it off. If there’s not enough money in the estate, the credit card company has to take the loss and write it off. The account is then closed to prevent someone from using it illegally.

One thing is important to think about. If you are a spouse and not responsible for the debt, the executor still has to pay that debt. If your spouse had $50,000 in assets that you didn’t jointly own but you were expecting to receive, you won’t see any of it until debts are paid off. Life insurance should be safe, but that’s only if you were named as a beneficiary.

Other assets like the sale of a car, savings/checking accounts, bonds, or jewelry may be used to come up with the money to pay off debts. The general rule is that life insurance goes to the beneficiaries, other assets are totaled up and used to pay off secured debt first, legal fees second, and unsecured debt third. Any remaining money from assets goes to the heirs.

Is it a joint account? If both your name and your spouse’s name were on the account, you are responsible. If you cannot make the payment, talk to the credit card company about a lower minimum payment to keep the account current until financial matters like life insurance and will readings are completed.

Were you only an authorized user? If you were only an authorized user and not an account holder on that credit card account, you are also not responsible for the debt in a common-law state.

In many cases, there is no way for the credit card company to sue you for repayment if you reside in a common-law state. If you reside in a common-law state and debt collectors are coming after you for your spouse’s debt, you should contact the estate executor. You’re also protected by federal laws from harassment by debt collectors. Keep reading to learn how to get them to stop if they are continually demanding that you pay up.

 

The Community Property States Have Different Rules

There are exceptions to the prior rule on the estate being responsible for repayment rather than the spouse. If you live in a state that follows community property laws. Community property laws state that the assets held by a married couple are “communal” or shared. If you reside in a community property state, you may be held responsible for debt your spouse racked up prior to his or her death. Does this mean you have no choice but to pay it? It depends. If you had no idea that the debt was charged, an attorney could argue “marital waste” and try to get it discharged from the debt you’re responsible for paying.

How would you prove marital waste? If the items do not benefit you at all and won’t ever benefit you, you may have a good argument. For example, if your spouse used a credit card to buy beekeeping equipment and you’re allergic to bees, you’d never use that equipment and shouldn’t have to pay for it. If the credit card debt was for a trip you took to Europe together, you did benefit and would have to pay it back.

What do you do if you live in a community property state and have to pay it back? Talk to the credit card company. It can take time to settle life insurance claims and receive any inheritance. Explain the situation and see if the company will lower the minimum payment while the executor, possibly yourself, takes care of all of the notifications to calculate assets and settle debts. It may be in your best interest to hire a lawyer who specializes in estate law. Having an expert in your corner makes it easier to grieve and get through a very difficult situation.

 

Immediate Steps to Take Once You Have Obtained the Death Certificate

As soon as the death certificate is filed and ready, request as many certified copies as you’ll need. You may want to order a few extras at the same time. A photocopy is usually not accepted by financial institutions. You must have a certified, notarized copy from the city or state where the death occurred.

Life insurance companies, banks for checking/savings, investment accounts, credit card companies, mortgage companies, car loan companies, and other creditors will all want to see the death certificate. Some many then take a photocopy and give you back the original, but you shouldn’t count on it. Ordering additional death certificates down the road can be time-consuming and costly. It can take over a month to get a death certificate and the cost varies. In some areas, you pay a fee to verify you are who you claim you are plus the cost of the death certificate.

Keep others from taking out new loans in your spouse’s name. Send a letter and death certificate to the three major credit bureaus. Make sure that they add the statement “Do Not Issue Credit” to your spouse’s file. Finally, verify with all three agencies that no new loans or credit card applications have been received using your spouse’s name.

Once you have a notarized original copy of the death certificate, send a letter explaining that the account holder passed away. Include the account number, address, and death certificate. Mail it certified mail so that you can track where it is and when they receive it. Thanks to the Credit Card Act of 2009, once the notice of death is received, interest and late fees cannot accrue. You or the estate has 30 days to pay off the debt in full before interest is added.

If debt collections agencies start calling you, refuse to answer questions. You have rights under the Fair Debt Collection Practices Act that allow you to tell them to never call again. That keeps the company from calling you again. At this point, talk to an attorney. If the debt is past the statute of limitations (varies by state), the lawyer will get the debt discharged.

If you are truly responsible for the debt and cannot pay it back, arrange a payment plan. The goal is to pay it off without ending up further in debt on your own. Hopefully, you won’t owe a penny and can focus on your grief, loneliness, and moving on. If you do have to pay it back, know that credit card companies will work with you. Estate, wills, and trusts attorneys can also be a tremendous help at this stressful time.

 

Things to Consider in the Future

Each year, check your credit score and make sure you don’t have your spouse’s debt (new or old) showing up on your credit report. If you see anything suspicious, report it to Equifax, Experian, and TransUnion. Pay close attention to new credit card applications. That’s one of the more common forms of identity theft after a loved one’s death. Remove it from your record.

As you get the debt paid down or off, it’s a good time to look at your own credit score. If it’s increasing, you may want to apply for a low-interest credit card and save money. If you still owe a little of your spouse’s debt, a 0% introductory rate makes it possible to pay off any remaining money and start anew.

If you need help finding the right credit card, use the Low Cards Credit Card Selection Tool to get started. The process only takes a few seconds, and we’ll match you with the best credit card offers to meet your needs.

 

 

The information contained within this article was accurate as of August 19, 2020. For up-to-date information on any of the terms, cards or offers mentioned above, visit the issuer's website. Many of the offers on this article are from our affiliate partners, and LowCards.com may be compensated if you take action with any of our affiliate partners.

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tracy

About Tracy Farnsworth

Tracy Farnsworth went straight from a business track in high school to a full-time job in mortgage banking in Burlington, Vermont. After having children, she built a freelance career in content writing and took online classes as time allowed. She completed Social Media Marketing and Digital Marketing certificate programs with Ireland's online Shaw Academy and completed several courses in SEO and analytics. In her free time, she's the “mom” to a very clingy rat terrier, and the pair walk at least a mile every day. She's also a novice baker who is trying to master the art of sourdough bread.