Unlike a debit card, money associated with a credit card transaction is usually borrowed from the credit card company or card issuer. The loan, which is regarded as a credit card loan, is to be paid in the future. While credit card loans has helped several Americans, it has its fair share of disadvantages. And like other loans, some of its disadvantages are usually obvious when you default on the loan. If you owe a credit card debt, provided you are alive, the chances of compelling you to repay the debt is high. But, what happens if you pass on? Will the credit card company claim your house?
Credit card companies cannot claim your house after death. If a deceased individual has a credit card debt, it is left for the estate executor to settle the debt from the proceeds of the individual’s estate.
After death what happens? Your estate is distributed based on your wish. If you die without a will, the court will distribute your assets based on the intestate law of your state. What about your debts? Does credit card debt die with you? Of course, people say that death is the end of everything. But that doesn’t apply to debt. In fact, deceased individuals who owe certain debt, are required to repay the debt (via their estate). In this article, I’ll be shedding light on a common misconception that has gotten many people confused.
Can Credit Card Companies Take Your House After Death?
Credit cards work in a unique way. It gives you access to money you don’t have. However, you are required to make a minimum payment or full payment of what you owe in the future. A credit card comes with many benefits. Unlike a debit card, it is secure, it can help improve your credit score, it come with cash backs reward points and some bonuses, and so on.
As I always say, the major downside of any loan is often glaring when you fail to pay back the debt. For instance, if you fail to pay your credit card debt, the company may raise your interest rate include late payment fees which will augment your financial burdens. And if you still refuse to pay, the card issuer may sell the debt to a credit card company, thus, worsening your situation.
The best way to escape those severe sanctions that comes with defaulting on a loan is by paying what you owe in time. However, come to think of it, shouldn’t death render your debt invalid? What happens to debts when you die? Many individual ask this questions, hoping to get an answer that would likely compel a debt owner to take his or her life in order to escape a debt.
What Happens to Debt if You Die?
If deceased individual were exempted from paying debts they owe, what do you think will happen? Many will take out a huge loan, lavish it on houses, cars and all the luxury this world has to offer, then proceed to take their life in order to exempt his or herself from paying the debt. In addition, many lenders will run at losses worth millions of dollars.
With that said, what happens to debt if you die? If you die your debt will be settled with proceeds from your estate. Your estate executor (an individual designated to administer the last will and testament of a deceased) will undergo a process called probate. During this process, bills, such as debts will be settled.
However, if the estate lacks enough money to settle the debt and no one co-signed the debt, the creditor may be out of luck. There are situations whereby the loved ones of a deceased may be required to pay the debt. For instance, if there was a co-signer on a loan, the cosigner will have to pay the debt.
Death: The End to Credit Card Debt?
“Do credit card debt die with you? “This is a question that has left many people scared and confused. Because death doesn’t exempt you from repaying a debt, if you die, your estate will be used to settle what you owe. The process is usually handled by your estate executor who may hire a probate attorney for assistance.
In a nutshell, if you have a credit card debt after death, your relatives are sometimes left to deal with the debt.
With that settled, let’s consider the main topic of this article “Can credit card companies take your house after death?
This is only possible with secured debts like mortgage loans where if you default on the loan, the house (collateral) can be taken. In the case of a credit card debt, this may not be possible. If the company cannot claim your house as collateral, what happens to your credit card debt when you die?
As explained earlier, if you die with a credit card debt, your estate will be used to settle the balances. If there isn’t adequate money to pay this debt, and no individual co-signed for the debt, it’s safe to say the creditor is unfortunate. And that is because family members of a deceased individual are usually not obligated to use their money to settle a credit card debt after death, based on the Federal Trade Commission. However, there could be a few exceptions, for joint accounts and some laws that vary by state.
What Debt Is Forgiven When You Die?
Death is like a full stop in a sentence, it signals the end of everything regarding an individual’s life and exempt them from certain compulsory obligations. While some debts can be forgiven upon the death of the debtor, others must be settled with the proceeds of your estate through a process known as probate. What types of debts are forgiven when you die?
Federal student loans are usually forgiven when student passes away. In addition, Federal PLUS loans are forgiven when either the student or their parents passes away.
To ensure that your family and loved ones don’t inherit a plethora of huge debts after your death, ensure you make an effort to settle them in time. Failure to do so may diminish the value of your estate as it’ll be used to pay off your balances.