Credit Card Debt Liability

April 26, 2005 11:40 PM

I have a minimal amount of credit card debt. I was wondering whether, in the event of my death, my wife would be liable for its repayment.
posted by haelen to Work & Money (13 answers total)

Best answer: Not unless it's a joint account. "The key point to remember is that you are only responsible for debts that you contractually created." "Typically a will controls financial affairs after a person's death. A will distributes assets, not debts. But, before any money can be distributed to heirs, all the debts must be paid. So enough assets are sold to pay for any debts that remain. Only after the debts are paid will the remaining assets be distributed among the beneficiaries of the will." Source
posted by fourstar at 2:27 AM on April 27, 2005

Yes, but won't the creditors be able to insist that joint assets be used to pay off the debt?
posted by grouse at 3:00 AM on April 27, 2005

So the answer is that if it is not a joint account but your wife gets your estate, then she in essence pays as the estate will have to first pay this debt. School loans, though, usually are cancelled upon death.
posted by caddis at 4:27 AM on April 27, 2005

Response by poster: Thanks for these. I guess it depends how big my estate is when I go (currently it amounts to next to nothing) :)
posted by haelen at 5:41 AM on April 27, 2005

As I understood it, CC debts arent secured against anything. How can they force your widow to pay for an unsecured debt?
posted by the cuban at 6:02 AM on April 27, 2005

You may want to start looking into some insurance. Make sure you're leaving each other enough money to pay off debts and funeral expenses!
posted by Eideteker at 6:16 AM on April 27, 2005

While your wife is not technically liable for the debt, your estate is. Assuming that she inherits whatever you own (either by you stating that in a will, or by you not having a will), this includes debts as well as assets.
posted by dg at 6:49 AM on April 27, 2005

Just to clarify. Your wife will not inherit debts. After someone dies their estate will be responsible for paying off debts that person incurred, such as credit card debt. After paying off the debts whatever is leftover goes to the heirs. If there are insufficient assets to cover the debts the heirs do not inherit the debts, the creditors just don't get paid fully. I am sure there are lots of ways in which this could get much more complicated in which event you might want to consult with a lawyer.
posted by caddis at 7:04 AM on April 27, 2005

Something that has been missing from the answers so far. Say the OP and his wife own a house jointly, and the OP has credit card debt. The OP dies (hypothetically only) does his estate consists of the credit card debt and half the house? Or just the debt?
posted by grouse at 7:23 AM on April 27, 2005

To answer grouse's question.. my understanding is, if the house is in both person's name, the OP's half of the house is part of his "estate" when he dies, as is the credit card debt. If necessary, the estate could be forced to liquidate the house in order to pay off the credit card debt, anything left would then go to the spouse.
posted by HuronBob at 7:27 AM on April 27, 2005

Now you are getting into areas best answered by a trust and estates attorney in your own state. In general, when one spouse passes the other gets the house outside of the will and probate. They own the house in a joint tenancy and typically that means that the survivor takes over the entire tenancy. The decedent's interest in the house is not part of the estate and can not be reached by creditors (unless they have a security interest in the property), I think. You shouldn't rely on my off the cuff interpretation and you should contact a lawyer if this is a real situation. On preview, already my interpretation is in doubt; best to contact an attorney.
posted by caddis at 7:37 AM on April 27, 2005

Probate can be very complicated and I suggest you discuss this with a trust/estate lawyer, as caddis suggested. Another variable to throw in the mix is that, in some places, only the *creditor* is obligated to issue a notice of the debt, and they have only a year in which to do this. Of course, if the debt is released, this might considered taxable income.

From my fuzzy recollection of my dad's probate, I think only his sole-owned assets were considered to be his "estate", and not the joint property he held with my mother. His assets ended up being only his personal IRA account, but since that emptied to the beneficiaries at the time of death, his account was considered to be worth nothing. So, he had no estate and thus any creditors would be SOL. Of course, this is all according to FL probate law and relying on my memory of debt scenarios that would never happen because my dad was so good with his money. So take this with a grain of salt.

What I do recall from the process is that common sense doesn't always hold true, even if there is a defined will and a surviving spouse. My mom left the process with a new will that took into account all the little tricks we learned (mostly about trusts). Get thee to a lawyer!
posted by Sangre Azul at 8:24 AM on April 27, 2005

You may want to start looking into some insurance

If your wife would be significantly worse off, financially (on an ongoing basis, not just immediately) if you died, which is almost certainly true you are now a wage earner, then you definitely should have term life insurance (say, $100,000 or more). It's quite inexpensive, and it will take care of credit card payments, one-time expenses, and will cover much of future (lost) earnings. [I'd go into more details, but this thread isn't about term insurance, realy.]
posted by WestCoaster at 2:18 PM on April 27, 2005