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What Happens to Debt When You Die?

Posted By:  |  July 15, 2016  |  0 Comment(s)

In a survey over 1,000 people in debt, 1 in 5 Americans believe that their debt will never be paid off during their lifetime. This leaves the obvious question that many Americans have: Where does my credit card debt go when I do?

Answer: It depends.

If There Is No Joint Owners on the Account

For people with a lot of debt, it is usually assumed their leftover funds will cover the financial burden. However, for people who’s funds cannot cover the debt, their assets are liquidated. When the assets and leftover funds still won’t cover all of the debt, the credit card company is usually out of luck (remember, this is in the case that there is no joint owner on the account).


If the deceased person’s name was the only one on the credit card account, the credit card company sometimes has to write off the expense. In this case, none of the heirs or relatives are responsible for the debt. When someone dies, their executor, or person responsible for dealing with the will and estate, will explore the financial options possible for covering the debt.

If There Is a Joint Owners on the Account

It is normal for spouses to be joint owners on their credit accounts. Additionally, many parents will cosign on credit cards with their children. People also cosign with elderly parents to help them keep track of their finances.

People who are joint owners on a credit card account are responsible for the deceased person’s credit debt. Joint owners signed the credit application — they are separate from the people who are merely linked to the account. Authorized users who mutually used the deceased person’s card but didn’t sign the initial application, and didn’t pay the bills, are also not responsible for the leftover debt.

The joint owner has to deal with both emotional and financial distress.

What Happens To Auto and Mortgage Debt?

If someone dies will still owing a mortgage on their home, the deceased person’s house will likely get foreclosed by the bank. If there is a co-owner on the house, they will not only inherit the house, but also the payments. For automobile debt, if the deceased person was still making car payments, the vehicle will most likely get repossessed. That is, unless another family member would like to continue making payments to keep it.

Life Insurance Can Help

Life insurance can help cover debt of someone who has passed away. This way, instead of joint owners covering debt, the deceased persons life insurance policy can cover debts. This can be helpful if family members that would end up being responsible for the debt. Life insurance can also preserve assets that would otherwise be eaten up to cover one’s debt. 

Debt after death is not a happy subject to talk about, and having a death in the family is hard emotionally. But in reality, it is smart to think about, and create a plan. Planning ahead can save one’s family members from having to deal with a hard financial situation on top of the tragedy.



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