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Protect Your Family From Credit Card Debt


This guest post comes from Jonathan from Master Your Card. He discusses everything about credit cards over there. If you like what you read here, check out his blog or you can subscribe to his feed here.

It’s one of those things that none of us like to talk about, but unfortunately for many families not talking about it can lead to undue stress and complications should the unexpected happen. The subject we are talking about is death – and sooner or later it will affect every one of us. Unfortunately, for many families, they find out during this time of immense grief that the sudden death of a loved one or family member has brought about another unforeseen burden – credit card companies wanting to know who is going to be responsible for the deceased’s debt.

It’s almost unimaginable to think of – you are dealing with the death of a spouse or other family member and the phone rings with someone from the deceased’s credit card company wanting to know how you plan on settling the bill. The sad fact is that many companies try to take advantage of people during periods of grief to make decisions without understanding what they are doing. Know the facts to help you protect your family from credit card debt after a loved one passes away.

First and foremost understand that you are [generally] not responsible for a family member’s debt unless you:

  • Co-signed for the credit card
  • It was your spouse and you live in a community property state.

These are the only two ways, despite what the credit card company will tell you, that you are responsible for the debt of the person who has passed away.

A co-signer is not the same as an authorized user. Authorized users are not responsible for the debt of the deceased. They should immediately report the death to the credit card company and cease using the card, but their obligation stops there. Despite what the credit card company may tell you, you are not obliged to repay the debt if you were an authorized user.

Co-signers on the other hand are responsible for the full amount of the credit card debt. They become 100% liable for the debt at the time of passing of the deceased. Essentially you agreed to be responsible for the debt in case the original borrower could not pay it back – and this situation, unfortunately, qualifies as one in which they can’t pay it back.

If the deceased was your spouse and you live in a community property state you should also be aware that under state laws you will be responsible for the debt of your spouse (whether you were a co-signer, authorized user or not) at the time of their passing. Community property states [as of March 2008] are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

You should also be aware that if you held any joint accounts or real estate with the deceased that a portion of those accounts become part of the estate of the deceased and will or no will, the creditors will get their money first. The only financial asset that is protected from creditors at time of death is life insurance policies.

Don’t leave your family in a financial nightmare should you pass away unexpectedly. Take some time to go over your debts and financial assets with your spouse or significant other. Know the laws of your state and consult with a family lawyer to make sure that your credit card debt won’t haunt your family long after you are gone.

Thanks Jonathan for the guest post!


  • Reply Frugal Dad |

    Great reminders regarding what happens to your debt when you are gone. It’s important for loved ones to know how to settle your estate, and it is the honorable thing to do assuming you have the assets to cover your debts.

  • Reply Vered@MomGrind |

    “These are the only two ways, despite what the credit card company will tell you, that you are responsible for the debt of the person who has passed away.” This is SO important, b/c credit card companies *will* try to say otherwise. Thank you.

  • Reply JA Huber |

    I’ve been learning about debt and death with the unexpected passing of my ex-husband earlier this year. We were divorced for 3.5 years. I had forgotten I was an authorized user on a gas card he had until I received a fraud alert via Equifax a couple of weeks ago. “Someone” (I have a pretty good idea who) maxed out the card after his death and I was afraid I would be responsible. Thankfully, the credit card company took me off the account and told me I wouldn’t be responsible.

  • Reply Jonathan @ MYC |

    Many thanks for posting this, Tricia!

    JA Huber, I’m glad to hear you were able to sort your problem out without too much fuss.

    If only credit card companies were always this understanding!

So, what do you think ?