Finance

Credit Card Debt and the Estate – What Happens to the Debts of the Deceased?

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Credit Card Debt and the Estate – What Happens to the Debts of the Deceased?

Families may experience great stress when managing the debt of an deceased loved one who has passed on. Most debts should be covered from their estate funds or property; however, exceptions do exist and this must be determined individually.

Before dealing with creditors following the death of a loved one, it is crucial to be knowledgeable of relevant laws. As soon as copies of their death certificate have been obtained and sent out to creditors.

So, what happens to the debts of the deceased?

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When someone dies, any debts owed solely or jointly between spouses will automatically be covered by their estate, including credit card bills. But this doesn’t mean their debts go away entirely; creditors can still make claims against an estate and its Personal Representative may need to sell assets to meet them.

McClary notes that medical bills and care provider debt will not just evaporate by themselves. Instead, the debts will need to be settled through the probate process – possibly through asset sales in order to do so.

Creditors may contact family members of an estate to gain the contact details of its personal representative, executor, or administrator – not you personally – but cannot demand payments directly from your estate. It’s illegal for creditors to suggest that any debt inherited by a deceased is your responsibility – to protect your rights it would be wise to work with an attorney to manage this type of situation.

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Though many believe that credit card debt follows with someone upon death, this is often not the case. Instead, after someone passes on, their debts become the responsibility of their estate and should be settled using money from it. It is the executor’s duty to ensure all debts are settled accordingly.

Remind creditors that insolvency administration orders may be made against the deceased; although, these are typically only issued against joint tenants or guarantors.

At this stage, it’s vitally important that you collect as many documents as possible so you can ascertain all outstanding debts and value of the deceased’s estate. Furthermore, any utilities companies should be contacted to settle final balances and cancel direct debits as soon as possible. Also consider hiring a pension tracing service to identify unclaimed pension pots from deceased. These services charge fees for their work.

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At the death of a loved one comes immense sorrow; dealing with their estate can be further compounded if they had outstanding bills such as credit card debt. Before any assets can be distributed among heirs or beneficiaries, these debts must first be cleared based on state laws and probate procedures.

Debts typically pass to the personal representative or executor of an estate; usually named in a will or appointed by the court in its absence, this individual will then settle any outstanding debts using assets belonging to the estate.

Personal loans, unsecured debt and secured debt loans are available. Secured debt may include mortgage and car loans while unsecure debt such as credit card or medical debt may require collateral such as a pledge of property as collateral. When considering these options it is important to understand your local laws as well as consult a probate attorney.

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Life only holds two certainties – death and taxes. Unfortunately, however, many don’t understand that debts don’t disappear with death; rather they become the responsibility of the estate and its executor/personal representative should manage them accordingly.

Credit card, mortgage and medical debts will remain when someone passes away. They should typically be paid from their estate; if there is not enough money available then any assets that need selling could have to be liquidated to satisfy them.

Debt in the UK does not pass from generation to generation and family members are not held liable for individual debts of deceased family members. Therefore, it is crucial that heirs make sure no credit cards in their deceased loved one’s name were being used and any automatic withdrawal payments stopped to avoid an outstanding debt being missed when it comes time to settle their estates. Also make sure your vehicle registration has been updated at DVLA before taking any steps against someone’s estate.