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Dealing with debt after death

When someone dies, his or her survivors might not initially consider that person's outstanding debts. Nevertheless, this kind of debt does not disappear when a death occurs, and it counts against the decedent's estate. Usually, it is required for whoever is handling the estate to settle the debts before the rest of the assets are distributed to the benefit of the deceased person's heirs.

When a person dies and his or her assets are placed into an estate, an administrator or executor is often responsible for handling that estate. This includes settling any debts and transferring the ownership of other assets according to the decedent's wishes. The person administering the estate, however, is generally not liable for the debts if the decedent's assets are unable to fulfill his or her obligations.

Although the heirs of an estate do not normally inherit credit card debt, some debt collectors might try to convince people they have to pay any outstanding balance left by a loved one. However, those individuals might be held liable for the balances under certain circumstances. One of those circumstances is if someone opened a joint account or co-signed an agreement with the deceased. However, someone who was merely an authorized user on an account would not have to pay back the balance. Another exception involves married couples: a widow or widower in a community property state might be held responsible for some debts.

Those who are unable to make the payments might be named as a defendant in a credit card lawsuit. However, that person might choose to work with a lawyer who might be able to review the person's case. Depending on the circumstances, that lawyer could suggest a number of strategies, which might include debt settlement or filing for bankruptcy.

Source: The Motley Fool, "What Happens to Credit Card Debt When Someone Dies", Peter Andrew, July 19, 2014

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