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What Happens to Credit Card Debt When One Dies?

Credit card debt is something that many people are plagued with. If you have a large amount of debt, it is possible that this may be something that will continue to follow you throughout your life. But what happens to credit card debt after you die? The short answer is that it depends on several factors. Here is a look at the way that a person’s finances are handled after death, and what can happen to their debt burden:

1. A person passes away. Once they have been declared dead, one of two things happens. If they are married, their assets, and all of their debts, get passed on to their spouse. If the debts far outweigh the assets, and are things that the spouse knows nothing about, there are some protections for this, and the widow(er) should contact a lawyer.

2. If the deceased is unmarried, was the second to die, or they die at the same time as their spouse, then all of their assets go into probate. During this time, the goal is to find all debts and assets that this person owns. If there is any life insurance on this person or settlement based on a lawsuit from an accident, it may or may not be treated as separate depending on the situation.

3. If the amount of cash outweighs the amount of debt, then the debt is paid off, and the remainder of the money is available for inheritance. If a will exists, the money goes to follow the wishes of the deceased. If a will does not exist, then the money goes either to the closest relative, or to the state, depending on the circumstances.

4. If the amount of debt outweighs the amount of cash and/or investments, then physical property will be auctioned at an estate sale to cover the rest of the debt. This includes a home, its furnishings, and any vehicles owned by this person. If money is left over after the accounts are settled, then that money is inherited based on the same rules as the previous step.

5. In some cases, like when a nursing home has taken someone for the remainder of their life, the nursing home may be the beneficiary of all extra funds after the debts have been paid. In this case, the items that are of sentimental value usually still go to the family, but the value of their home and vehicles usually go to the nursing home or hospital after being sold at public auction.

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