Debt Consolidation

How to Deal With Credit Card Debt After the Death of a Parent

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Discussing the death of a parent can be incredibly difficult. However, having a conversation about a parent’s estate and their credit card debt could save you some trouble during an already challenging time.

In certain situations, you may be responsible for covering the remaining debt your parent left behind, specifically if you cosigned on a loan or were a joint account holder for a credit card.

If you’ve asked yourself “Am I responsible for my parent’s debt?” or “Do I have to pay off credit cards of the deceased?” read on to find out how to deal with credit card debt after the death of a parent.

What happens to credit card debt after the death of a parent?

Your parent’s credit card debt transfers to their estate after they die, along with any liquid assets, such as cash, checking or savings accounts and certain types of investments. If the liquid assets are large enough to cover the credit card debt, there’s nothing to worry about.

If your parent didn’t have any assets, the credit card debt, in certain situations, simply goes away. Some creditors may forgive the debt to the estate if there is no means to pay it.

The process for dealing with a parent’s estate is fairly consistent, though it can vary based on the state in which they lived. For example:

  • Kansas: Does not have estate taxes
  • Vermont: Estate tax will only apply if the value of the estate is $2.75 million or more

If your parent had a will, they may have named an executor. If not, the court appoints one and grants that executor legal responsibility to manage any remaining financial obligations. Similar to estate laws, the succession of who the court chooses as executor varies. In Oklahoma, for example, the priority list is as follows:

  • Surviving spouse or a person requested by the spouse
  • Children
  • Mother or father
  • Brothers or sisters
  • Grandchildren
  • Next of kin entitled to inherit under state law
  • Creditors
  • Legally competent person

The executor’s role is to go through the parent’s outstanding debts by reviewing their credit report and bills. Because of the prevalence of online banking and autopay, you may need to track down passwords for your parent’s accounts. Some estate planners recommend including passwords in a will to help executors more easily review financial information. However, keep in mind that passwords can change often, so it may also be helpful for your parents to include answers to the questions some sites ask for to retrieve lost passwords.

The executor is also responsible for contacting the Social Security Administration and all the parent’s debtors after the death. You will need certified copies of your parent’s death certificate and information including account numbers and usernames.

The next step for the executor is putting together a list of all the debts and determining the order of how the estate will pay them. Different states dictate the estate to cover debts such as mortgages and medical bills first. Probate is the process of determining assets, paying off debts and distributing the remaining inheritance. This can drag on for months if there’s no will that provides clear instructions on inheritance distribution.

If debt collectors or credit card companies begin calling

Speaking with debt collectors

When debt collectors begin calling, kindly let them know of the death and ask for any proof of debt in writing. The Fair Debt Collection Practices Act only allows debt collectors to contact a relative once to gather personal information. Other than that call, debt collectors are not allowed to contact you looking for money unless you’re the executor. Debt collectors may also reach out to the executor or the person with authorization to pay debts with assets from the deceased person’s estate.

If you’re not the executor but a debt collector continues to contact you, send a letter via certified mail. State clearly that you choose not to be contacted and document when the collector received the letter by paying for a return receipt. If the collector persists, report the problem to your state attorney general’s office and the Federal Trade Commission.

Calling credit card companies

You’ll also need to call the credit card company and ask to speak with someone in the department that handles deceased accounts. When you’ve connected with the appropriate personnel, ask them to close the account and determine the best way for the executor to send the death certificate to the credit card issuer.

A phone call in many cases should be enough to close the credit card account. For example, American Express will ask for a date of death and contact information for the executor, a trustee or an attorney, as well as your contact information and your relationship to the cardholder. You can always follow up with a request in writing.

If you’re liable: How to manage the added debt

If you held any accounts jointly with your deceased parent, then you are liable to pay any outstanding balance. However, authorized users of credit cards do not have to pay the debt. For example, your parent may have given you authorization to use their personal credit card to manage bills on their behalf. Keep in mind, however, that if, as an authorized user, you attempt to use your parent’s credit card after your parent dies, you can be liable for fraud or held accountable for the balance.

Paying off your parent’s financial liabilities can be tricky, particularly if you already have your own debt, but there are options available to manage debt and pay down the balance.

Debt consolidation

Juggling multiple loans and credit card payments can make it difficult to keep track of various due dates and amounts, especially when you’re dealing with the loss of a loved one. While you may be able to come up with a system of tracking that debt on your phone or in a notebook, a customized plan or debt consolidation may help streamline the payment process.

Consolidating your debt and the debt from your deceased parent if you held accounts jointly with them simply means combining everything, or most of what you owe, with a single new debt. Debt consolidation is usually in the form of a loan or credit card balance transfer.

  • A debt consolidation loan is a lump sum of cash you use to pay off existing debts. Instead of paying multiple debtors, all the outstanding debts from the loan or credit card on which you cosigned fall under the new loan with one payment, loan term and interest rate. Depending on your credit score, you could qualify for an improved interest rate.
  • Some credit cards offer a promotional 0% APR on balance transfers for a set period. These cards can provide valuable breathing room to pay down the added debt from your parent without incurring any interest. However, once that promotional period ends, you’ll have to begin paying the card’s regular interest rate. And if you haven’t repaid your balance in full, you could also be hit with deferred interest. If you’re unsure you can pay off the full balance within the promo period, you should consider other options.

Debt management plan

Not everyone is an expert on financial planning and debt management, so turning to a professional may be the best route when dealing with a deceased parent’s debt. That’s where credit counseling agencies can help.

Credit counseling agencies develop debt management programs for consumers who need help dealing with their financial liabilities. Upon enrolling in a program, the credit counselor helps you manage debt by consolidating your payments into one sum. While the credit counseling agency does not consolidate your debt, they, in turn, use your single payment to pay each of your lenders.

A credit counselor will also work on your behalf to lower interest rates and fees or pay off your debt for less by offering a lump sum payment to creditors. This could allow you to pay off your parent’s debt faster and save a significant amount of money in the long run. Debt management programs can decrease the number of calls from creditors, increase your credit score and may even help you escape bankruptcy. However, they can come with fees, so you’ll pay for the convenience this option offers.

Debt settlement

On occasion, some creditors may be willing to negotiate a lump-sum payment to cover the balance of your parent’s credit card. This means you’re free and clear of their debt after paying the one-time amount. However, you may have to deal with some negative repercussions.

For instance, credit card companies might not be open to debt settlement if you’re consistently making at least the minimum payment for your parent’s card each month. To get the company to accept the idea of debt settlement, you may need to stop making payments on the card. Keep in mind that while this can bring the credit card company to the negotiating table, the tactic will hurt your credit score by showing several late payments and noting that you settled the debt. This mark also stays on your credit report for seven years.

You also may need to hire a debt settlement company to negotiate on your behalf. These groups, while helpful, generally charge a fee to reduce your debt, so weigh the costs before you decide on a debt settlement company. However, not paying a parent’s debt for which you’re liable will more than likely result in late fees, incurred interest and increased APR due to penalties. The federal and state governments may also tax you on any forgiven debt.

Bottom line

Death is an inevitable part of life, and dealing with a parent’s credit card debt can be challenging during a time of mourning and remembrance.

Take the time to talk to your parents about their credit card debt now, especially if you’re a joint cardholder, and create a plan for how to deal with their estate and debt in the event of their death.


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