The Truth About Decedent Credit Card Debt

Will your credit card debt haunt you when you die? Outstanding debts can be attached to an estate or trust if a creditor files a lawsuit against a decedent in court. Protect your estate and your loved ones from creditor attachment by taking precautionary legal measures to restrict debt collectors from forcing your last will and testament into probate court.


Who is obliged to a decedent’s credit card debt?

Whether a surviving spouse or other loved one is liable for the credit card debt of a deceased family member depends on signatory of creditor agreement. If a spouse or co-signing family member is participatory in a credit agreement, they will be obligated to pay outstanding debts owed on the account after the other co-signing party dies. Joint credit card accounts are the most common example of this circumstance. Authorized users of a decedent’s credit card account, however, are not necessarily liable for paying off the balance after the debtor dies. Not considered the true owner of the account, and authorized user does not have a duty to fulfill the card agreement with payment insofar that they have ceased using the card at the time of the owner’s death.


What is the estate’s role in debt dilution?

Federal law allows for debts to be recovered from a decedent’s estate after probate liquidation of assets under the proper conditions. Debt collection is a lead reason for an estate or trust to be reviewed by the probate court. Any qualifying property, savings accounts, or other financial assets that can be readily liquidated will most likely be subject to attachment if the debt the decedent has left behind is substantial. The downside is that heirs and beneficiaries may receive a smaller inheritance than expected.


How can an estate be protected from debt collection?

The Fair Debt Collection Practices Act (FDCPA) prohibits disclosure of disputed debtor information to third-party collectors. Reassignment of an account to third-party debt collector may be a violation of the account holder’s rights. Certain types of assets are now better protected than before 2017 as result of the reform of federal Employee Retirement Income Security Act of 1974 (ERISA) rules. The increased prudential measures associated with the expansion of estate fiduciary best practices, has extended protections to estates and trusts. The newest ERISA rules cover key estate assets from managed retirement plans and pension benefit plans, protecting them from the risk of creditor attachment for collection of payment on outstanding debts.


An estate lawyer can help.

New York law exempts most trusts from enforcement of money judgements (NY CPLR § 5205 (2012)). Contact a licensed attorney experienced in probate litigation for advice about outstanding debt that may affect an estate. A trust may be the best protection for your assets and beneficiaries in the future.


Ettinger Law Firm is a licensed New York attorney practice specializing in estate planning and probate litigation. Contact Ettinger Law Firm to schedule a consultation about an estate or trust law related matter.     

See Related Blog Posts

How ERISA Rules Protect your Estate from Attachment

Protecting Your Individual Retirement Account from Creditors

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