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Handling Business Credit Card Debt When the Primary Owner Passes Away

Dealing with credit card debt after someone passes away

Dealing with credit card debt after someone passes away can be overwhelming. My condolences for your loss. This is a tricky situation that many families face. I’ll walk you through some options and legal issues to consider when figuring out next steps.

First, take a deep breath. I know things feel chaotic right now. But you’ll get through this.

When someone passes away, their estate is responsible for paying off any debts – including credit cards. The estate includes assets like bank accounts, property, retirement funds.

If the deceased was the only person named on the credit card, you typically won’t be held personally responsible for paying it off. But the credit card company can file a claim against the estate.

Here’s how it usually works:

The credit card company will be notified of the death by the credit bureaus. Then they’ll close the account and notify the estate that payment is due.

If there’s not enough money in the estate to pay the debt, next of kin aren’t on the hook. The credit card company just has to write it off as a loss, that’s the risk they take lending money.

But things get messier if multiple people were listed as authorized users on the card. Let’s break that down.

Joint Credit Card Accounts

If the deceased shared a credit card account with another person, like a spouse – it’s considered a joint account. The surviving co-owner is usually still responsible for paying off that credit card bill.

The credit card company can pursue the surviving co-owner for the total balance. Even if they rarely used the card.

Now this doesn’t seem fair. But legally, when you agree to be a joint account holder, you also agree to take on liability for the full amount owed. Credit card companies have a strong case to collect from surviving owners.

That said, you may be able to negotiate with the credit card company for a reduced settlement. Especially if you have records showing the deceased racked up most of the charges. It can’t hurt to ask – the worst they can do is say no.

Authorized Users

Here’s where it gets murky. If the deceased added someone as an “authorized user” but they weren’t a joint account holder, there’s debate whether the user is liable.

Some courts have ruled authorized users aren’t responsible because they didn’t formally agree to the credit terms. But other courts have held users liable because they benefited from using the card.

So it’s a grey area that depends on your specific circumstances and local laws. The credit card company may still come after you aggressively for payment.

If that happens, don’t panic. You have defenses.

Start by disputing the charges in writing and request debt validation. The creditor has to prove you’re responsible for the amount owed.

You can argue you were only an authorized user, not a co-owner. Send evidence you didn’t benefit from the card or rack up charges. Any records showing the primary owner controlled the account will help.

If they continue pursuing payment, consult a lawyer. The attorney can review the cardholder agreement and help craft a stronger defense based on your legal rights. They may be able to get the creditor to back off or settle for pennies on the dollar.

Managing The Estate

Now let’s talk logistics. How do you pay off the deceased’s credit card debt?

First, figure out if probate is necessary. In most states, you’ll need to open probate if assets exceed a certain amount (often $10k-$100k).

The executor named in the will handles probate. They notify creditors so they can file claims with the court. The judge will approve or reject the claims.

Valid debts must be paid from estate assets before anything can be distributed to heirs. Credit card companies usually get priority.

If assets are tight, work with an attorney to negotiate settlements with creditors. You’ll likely need to pay a percentage of the balance owed.

Alternatives To Probate

For smaller estates, you may be able to use simplified probate processes to transfer assets and pay debts. It depends on your state’s laws.

Some options:

  • Summary administration – faster, simpler probate for small estates. Just provide basic docs like will, death certificate, and inventory of assets. You may be appointed executor to handle creditor claims.
  • Affidavit procedures – lets a spouse or family member collect assets and pay debts up to a certain amount without probate. You sign an affidavit and may need to notify creditors.
  • Small estate laws – allows summary transfer of assets when the estate is below a set value. You’ll need an affidavit, but creditors must still be paid.

An experienced probate attorney can advise which process fits your situation. They can deal with creditor notifications and claims to take the burden off you.

Selling Assets or Taking Out Loans

If the estate is low on funds, you may need to liquidate assets like property, cars or investments to pay large credit card bills. Otherwise the court may force assets to be sold to cover debts.

Another option is taking out a loan to pay the credit card balance, then repaying the loan over time from your own income rather than the estate. This can help avoid liquidating assets right away.

Just be cautious about taking on personal liability. Work with the attorney to ensure the loan is properly structured.

Hardship Programs

Some credit card companies offer hardship assistance if the surviving spouse or family is struggling financially. This usually involves reducing or waiving interest charges if you can pay the principal balance over time.

Ask the creditor if they have hardship programs or special assistance for surviving families. Provide documentation of financial difficulty. Programs vary widely, but it’s worth exploring.

Credit Score Impact

A final note – if you end up paying the deceased’s credit card yourself, be sure to ask the company to report it as “paid in full.” This is better for your credit score than having it show as “settled for less.”

Even if the account wasn’t in your name, becoming delinquent could negatively impact your credit. Getting it reported as paid off prevents lasting damage.

Closing Thoughts

I know dealing with financial matters after losing a loved one is draining. Especially complex debts like credit cards. Just take it one step at a time.

Don’t hesitate to seek help from an attorney and financial advisor. They can guide you on the best options for your unique situation.

If creditors give you a hard time, stand your ground. You have legal protections.

Most importantly, remember to be kind to yourself through this process. Surround yourself with supportive family and friends who can lend an ear. You’ll get through this.

Wishing you peace and healing in the difficult days ahead. My inbox is open if you need an empathetic ear. This too shall pass.

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