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Dealing with credit card debt after death

Kentucky residents who have recently lost a loved one might assume that decedent's debts disappear with them. However, just as the estate must handle the distribution of assets to heirs, the estate is also held liable for the person's outstanding balances. In fact, the estate is usually required to settle the debts before the assets are given out according the deceased individual's will.

Some people worry about inheriting debts from family members, but this does not usually happen. When a person has a joint account with the deceased, however, he or she may be responsible for paying off debts out of that account. This does not generally apply to authorized credit card users. In some cases, community property laws require spouses to pay debts owed by their deceased partners.

In rare cases, the child of a parent may be held responsible under filial responsibility laws, which are established in a majority of states. However, pursuit of payment under these statutes is uncommon. These laws often require the children of deceased parents to pay off medical and care bills the parent incurred prior to his or her death.

The rules of liability for debts incurred by a person who passes away can vary between states, but a general rule suggests that a person is only responsible for the balance if he or she is a co-signer on the account. If the estate is unable to settle the debt and the other liable party cannot pay, he or she might be subjected to creditor harassment. However, a person might be able to file for protection under federal bankruptcy laws.

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

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