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Does Credit Card Debt Die When We Do?

Unless you are a co-signer, you're not responsible for a relatives debt after they die.A reader recently asked an interesting question about what happens to credit card debt once you die.

The question: “How do I keep from paying credit card balances that are in my wife’s name? She passed away on 6/3/2011.”

It’s a question many of us one day will have to answer.

In most cases, the credit card debt is owed by the deceased and no one else, unless there is a joint account holder on the card, in which case he or she would assume the debt.

The process of paying off these debts should be fairly simple.

After you die, your estate — handled by an administrator or executor — is responsible for paying off debts and then distributing the remaining assets to your heirs, according to your will (assuming you have one).

Once a credit card company learns that one of its cardholders has died, it will make a claim against the estate.

If there aren’t enough assets to pay the bill, it will simply be written off as a bad debt and case closed.

Where this process can turn ugly is in the hassle that credit card companies and collection agenices give to living relatives.

Sometimes issuers will call, demand and even threaten in an attempt to collect. But they have no legal right to do so, unless — and this is where it gets tricky — you live in a community property state.

In some cases, according to Creditcards.com, debts can be considered joint property in community property states, even if the living spouse isn’t a joint account holder.

The rules vary, which means you’ll have to ask lots of questions, but community property states include: Alaska, Arizona, California, Idaho, Nevada, New Mexico, Texas, Washington and Wisconsin.

Even if you aren’t technically liable, anyone in this situation might feel obligated to pay the debt, and that’s OK too.

No matter what, you should know your rights, and the fact is in most cases it’s up to the executor to pay the debt. Should a credit card issuer ask you to do so, you can say yes or no, without any legal repercussions.

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