Terminal illness and credit card debt

July 17, 2006 9:33 AM

Suppose you have a terminal illness, and only have a few months to live. What's to keep you from running up huge credit card bills. Can the creditors make the next of kin pay up?
posted by jpoulos to Law & Government (31 answers total)

From what I understand, it depends on whether a spouse, for example, also has his or her name on the account, and also what the family considers "fair." I recently talked to a woman whose father died of cancer, and whose mother subsequently spent a great deal of money paying off his credit card bills even though she probably legally did not have to do so. She just felt it was the right thing to do, and nearly went bankrupt for following her ethics.
posted by occhiblu at 9:37 AM on July 17, 2006

In the United States, nothing keeps you from running up these bills. If the debt is in your name and your name only, creditors are screwed. In fact, even if you don't have a terminal illness, if you run up huge credit card bills and decide not to pay, your credit will be wrecked, but the creditors will still be screwed.
posted by Crotalus at 9:37 AM on July 17, 2006

Well, they can take you to court and have you pay docked every check until your debt is paid off.

If your husband or wife is just an 'authorized user' then there's no problem, and you can run up the debt all you want.

If, however, it's a joint account, that person will be responsible for paying off the debt.
posted by misanthropicsarah at 9:40 AM on July 17, 2006

Response by poster: There's no spouse in this scenario. Just adult children.
posted by jpoulos at 9:42 AM on July 17, 2006

The next of kin won't be personally liable for the debt, but if you had some assets, the creditors can force those to be used to pay the debt. So if you own a house and run up huge credit card bills, the creditors may be able to force your estate to sell the house to pay off the debts, regardless of what it may say in your will about who gets the house. IANAL.
posted by DevilsAdvocate at 9:43 AM on July 17, 2006

your estate is responsible for your debts. if you die both with money and debts owing, the creditors can collect before your heirs. every state handles it a little differently, but no, your debts don't die with you.
posted by crush-onastick at 9:44 AM on July 17, 2006

Credit life insurance is also available in conjunction with some consumer credit, including cards, but I suspect it has something to say about unreasonable purchases made after a diagnosis of a terminal illness being fraudulent, and they probably wouldn't issue it to you then either.

We'll miss you, jpoulos. Can I have your stereo?
posted by baylink at 9:46 AM on July 17, 2006

Response by poster: OK, but if you have no significant estate, but a lot of debt, they can't come after the family's possessions, can they?
posted by jpoulos at 9:47 AM on July 17, 2006

yeah, but say I'm a wealthy guy. I give my kids all of my money and possessions before I die. Then I run up a kajillion dollars of credit debt, which I convert to cash, and then launder.

Of course, I'd probably end up seeing a lot of loan collectors (along with the usual suspects) in hell later, but it seems like it would work.
posted by craniac at 9:48 AM on July 17, 2006

Given debt collectors' often-questionable ethics, I would also guess that while family members may not legally have to pay, they are likely to be harassed anyway.
posted by occhiblu at 9:48 AM on July 17, 2006

Response by poster: baylink: of course!*

* this is not a legally-binding statement
posted by jpoulos at 9:48 AM on July 17, 2006

I did some training with the Florida Hospice for volunteer work, and the woman doing the training said credit card debt (as long as it's in your name only) dies when you do. And that they'll encourage people to use it to their advantage.
posted by ThePinkSuperhero at 10:00 AM on July 17, 2006 [1 favorite]

No. They can't go after kin. If the credit companies want to be able to do that, they should have had someone co-sign.
posted by Brian James at 10:04 AM on July 17, 2006

In the US a debt obligations can not be inherited, at least not yet, but I'm sure the credit industry is working on it.
posted by Good Brain at 10:08 AM on July 17, 2006

My grandmother died a few years ago with enormous debt accrued from a couple of fistfuls of credit cards. I wouldn't have called her terminally ill, but she was in and out of hospitals like crazy for the last few years of her life, for a variety of ailments -- but that didn't stop her from spending like crazy. When she died, my mother actually sat down and wrote letters by hand to each of the credit card companies explaining that her mother was dead and therefore unable to pay them back. My grandmother's death was a tragedy, but it feels good to know she wound up getting a bunch of stuff for free, at the expense of an industry that works so hard to screw people over.

Of course, that same industry probably uses case studies like this one to justify ridiculous interest rates and other dirty tricks...
posted by hifiparasol at 10:19 AM on July 17, 2006

And yes, Mister Safire, I realize the correct terminology is "fistsful..."
posted by hifiparasol at 10:22 AM on July 17, 2006

Being told that you are terminal doesn't necessarily set an absolute end date. In 1971 doctors gave my father 6 months to live. He actually lasted 14 months before he died.

If you run up a huge debt, as described, and then turn out to not die when you expected, then you've made the rest of your life very, very complicated and less pleasant than perhaps you might want it to be.
posted by Steven C. Den Beste at 10:24 AM on July 17, 2006

They can't go after your family, but they can go after your estate - so if you have any property such as a house, a retirement account, life insurance, or anything like that, your creditors would get 'first dibs' on the proceeds from those.

In the absence of any attachable assets, the creditor is SOL, though. Also, as occhiblu pointed out, that probably won't stop bill collectors from harrassing your next-of-kin for a few years. In that case, a "drop-dead" letter is their best defense.
posted by deadmessenger at 10:34 AM on July 17, 2006

What DevilsAdvocate and crush-onastick said: while the person may pass away, the estate is responsible for debts that the person incurred. If there is property owned by the estate (including nearly everything you can think of as "property"...car, house, things in the house) then that property can be forced to be sold and the debt paid from the sale.

So if the adult children want anything, there will have to be a settlement of the estate FIRST, and the creditors will get theirs before the kids do.

Of course, IANAL, and this is not legal advice. And all that.
posted by griffey at 10:55 AM on July 17, 2006

A terminal illness is only the opinion of a best-guess. Doctors are scientists, they only know based on accumulated data of experiences that have already occured -- you may not even actually have a terminal illness. Man is always doubtable, even by the experts.
posted by vanoakenfold at 10:57 AM on July 17, 2006

DevilsAdvocate writes "So if you own a house and run up huge credit card bills, the creditors may be able to force your estate to sell the house to pay off the debts, regardless of what it may say in your will about who gets the house."

The lesson here is to sell house, disburse funds and then die.
posted by Mitheral at 11:01 AM on July 17, 2006

Keep in mind also on the "So if I'm rich, I can give away all my stuff, run up huge card bills, and then die?" scenario that recipients of gifts will be taxed on any value higher than $11,000 per year; there are higher tax-exemptions from estate inheritance on death, but before death, this puts a bit of a pinch on just giving everything away.
posted by netmouse at 11:56 AM on July 17, 2006

scenario that recipients of gifts will be taxed on any value higher than $11,000 per year

In the US, sure. Jpoulos' profile didn't indicate which country he lives in. It's a little different in Canada, where there is a significant benefit to giving it all away before dying.
posted by solid-one-love at 1:41 PM on July 17, 2006

If the person clearly gave away a LOT of assets and ran up a LOT of bills, creditors could conceivably claim fraud, and look to recover some assets, but I've never heard of it happening.
posted by theora55 at 2:03 PM on July 17, 2006

Wouldn't the Ken Lay not-guilty defence kick in?
posted by Mitheral at 2:15 PM on July 17, 2006

I think that a key point that is only being hinted at here is the difference between what creditors *can* do and what they *will* do. Just because they have no legal grounds to stand on will not keep some creditors from trying anyway, figuring that if they make your life hellish enough they might get paid. So keep in mind that while your heirs may win out in the end, they may have to spend a lot of time, energy, and money defending themselves. The creditor wouldn't, for instance, need to hire a lawyer to harass them for the money; your heirs, on the other hand, would almost certainly need one to stop it. Is it fair? Nope. Legal? Maybe not. But does it happen? Almost certainly.
posted by robhuddles at 3:07 PM on July 17, 2006

netmouse, not quite true (in the US). Firstly, it's currently (i.e. 2006) $12000. Secondly, if you give away more than $12000, you have to tell the IRS but you do not necessarily have to pay tax on it but it goes towards your total lifetime exemption which changes annually thanks to Congress ($2m if you die in 2006). If you are smart enough to die in 2010 (plan now!), there is no limit. Congress is working on this but the Republicans want no limits and the Dems want limits.

Of course, IANAL and IANAR (...Representative).
posted by TheRaven at 3:30 PM on July 17, 2006

Sounds like the best way to tempt fate into giving you a spontaneous remission ever.
posted by tomble at 6:17 PM on July 17, 2006

recipients of gifts will be taxed on any value higher than $11,000 per year

Actually, only the gift-giver is taxed, and only if gifts over $11,000 per year add up to over $1 million.
posted by designbot at 7:31 PM on July 17, 2006

designbot writes "only the gift-giver is taxed, and only if gifts over $11,000 per year add up to over $1 million"

And then we're back to trying to collect debt from a broke dead guy.
posted by Mitheral at 6:50 AM on July 18, 2006

First, I would call a lawyer and be sure. If he says legally no, go ahead.

Life didn't hand you the best of cards, but you are definitely playing them well. Just keep up your minimums until you pass and it will appear as though you had every good intention to pay them back.
posted by Ryaske at 12:14 PM on December 6, 2006