Does credit card debt die with you?

By Marianne Curphey

What happens to credit card debt when you die? Much confusion surrounds this issue -- with some believing that the debt dies with the cardholder, and others thinking that the deceased's debt is inherited.

To clear up these, and other, misconceptions, here are some answers to common questions about debt and death.

Can you inherit a dead family member's debt?
"It is a common misconception that you can inherit your parents' or partner's debt," says Una Farrell, media relations manager at the Consumer Credit Counselling Service (CCCS), a registered charity that provides debt advice services. "In fact, the debt is deducted from the estate. If there was no money in the estate, then, in theory, creditors would not be able to recover the debt."debt-death

In other words, you won't inherit debt -- but your inheritance could be decreased if the deceased leaves credit card debts behind.

What about bank accounts or joint credit card accounts?
If you have a joint account with someone, or have a debt with both your names on it, things get more complicated if the other account holder dies.

"If you were jointly liable for a credit card debt, or you were a guarantor for a debt then you would be responsible for that debt after someone died," says Paul Crayston, spokesman for National Debtline, which offers free debt support and advice.

Keep in mind that you would be responsible for the entire debt, even for the charges the now deceased person racked up.

"You are responsible for all and not just half of the debt," Farrell says.

How can you settle any outstanding debt with credit card companies?
If you find that you are responsible for the debt someone leaves behind, navigating your financial obligations, as well as the loss of a loved one, can be overwhelming.

"It is always best to seek advice," Crayston says. "These issues can be complicated and you may need advice tailored specifically to your individual circumstances."

Organisations like National Debtline, the Citizens Advice Bureau and CCCS can help. Not only can debt counselling services help you repay your debts, but they can help you cope with other challenges -- living on one income and revamping your household budget, for example.

"Your financial circumstances may well have changed if your partner brought in an income," Crayson says. "If there is no surplus income, you may need to look at negotiating with your creditors or considering insolvency."

It is also a good idea to seek advice if you inherit less than you expected because debts were paid off from the money in the deceased person's estate. It is possible that your inheritance is covered by the terms of a payment protection plan such as payment protection insurance (PPI). This type of insurance often covers the debt if the account holder dies or is seriously injured -- so find an expert to help you read the policy small print to see if you can make a claim.

What should you do if debt collectors keep coming after you after a family member dies?
If you are being contacted by debt collectors and you are not responsible for the debt, then you should follow the complaints procedure for harassment. This means you need to record details of who has contacted you (and when) and report them to the Financial Ombudsman Service.

Crayston says that some debt collection companies may try to pursue you for someone else's debt, even if you are not legally liable. In such cases, it is vital to remember -- and tell the debt collector -- the legal truth of the matter.

"If someone is married, it creates no financial link unless they have a joint account or credit card with their spouse," Crayston says.

See related: What to do with a credit card after death; How to deal with debt collectors


Published: 13 February 2012