Help Credit card debt - what happens?

[Fennec123]

I was just wondering what would happen to my outstanding credit card bill once I'm gone. I get mixed results when I google it… Some people say it gets transferred to your family… Whereas some people say it just gets cancelled. Is there anyway I can find out definitively? I don't really want to ask my credit card company because obviously it would look very suspicious!

 

[dragonofenvy]

It goes to your estate. Your estate is just whatever assets you have. So the bank would sell your possessions to pay the debt. If you have a beneficiary then yes they can inherit those debts. However, they cannot legally force them to pay those debts they're not legally responsible for. They will be responsible If they cosign, potentially too if they are their spouse (this is mainly for medical expenses so wouldn't worry about it). This is based on American laws which most other countries generally follow so find your own country's resources on their government websites if available. Most of the time though it's not worth the creditor's time and resources to pursue your debt.

Debts and Deceased Relatives

Here’s what to know about the rules and your rights when a collector contacts you about a deceased relative’s debts.

consumer.ftc.gov

What Happens To Credit Card Debt After You Die?

Unfortunately, credit card debt does not simply vanish when we are no longer around to pay the bills. Instead, this debt is considered part of our estate and managed by an estate executor. If you find yourself in this position, it’s important to know about what happens to credit card debt and any ac

www.forbes.com

 

[DarkRange55]

It goes to your estate. Your estate is just whatever assets you have. So the bank would sell your possessions to pay the debt. If you have a beneficiary then yes they can inherit those debts. However, they cannot legally force them to pay those debts they're not legally responsible for. They will be responsible If they cosign, potentially too if they are their spouse (this is mainly for medical expenses so wouldn't worry about it). This is based on American laws which most other countries generally follow so find your own country's resources on their government websites if available. Most of the time though it's not worth the creditor's time and resources to pursue your debt.

Debts and Deceased Relatives

Here’s what to know about the rules and your rights when a collector contacts you about a deceased relative’s debts.

consumer.ftc.gov

What Happens To Credit Card Debt After You Die?

Unfortunately, credit card debt does not simply vanish when we are no longer around to pay the bills. Instead, this debt is considered part of our estate and managed by an estate executor. If you find yourself in this position, it’s important to know about what happens to credit card debt and any ac

www.forbes.com

Yes.
When someone dies, their credit card debt doesn't simply disappear. In most cases, the debt becomes the responsibility of their estate. The executor or administrator of the estate is typically responsible for using the deceased person's assets to pay off their debts, including credit card debt. If there aren't enough assets to cover the debt, it might not be fully repaid, and the remaining debt usually doesn't pass on to surviving family members, unless they were joint account holders or cosigners.

It goes to your estate. Your estate is just whatever assets you have. So the bank would sell your possessions to pay the debt. If you have a beneficiary then yes they can inherit those debts. However, they cannot legally force them to pay those debts they're not legally responsible for. They will be responsible If they cosign, potentially too if they are their spouse (this is mainly for medical expenses so wouldn't worry about it). This is based on American laws which most other countries generally follow so find your own country's resources on their government websites if available. Most of the time though it's not worth the creditor's time and resources to pursue your debt.

Debts and Deceased Relatives

Here’s what to know about the rules and your rights when a collector contacts you about a deceased relative’s debts.

consumer.ftc.gov

What Happens To Credit Card Debt After You Die?

Unfortunately, credit card debt does not simply vanish when we are no longer around to pay the bills. Instead, this debt is considered part of our estate and managed by an estate executor. If you find yourself in this position, it’s important to know about what happens to credit card debt and any ac

www.forbes.com

** I'll be more specific.
The decedent's estate is responsible for the debt and the executor of the estate is supposed to pay off debt before distributing any assets to beneficiaries. If the estate doesn't have enough to pay the debt then the credit card company would absorb the loss.

 

[Fennec123]

Thanks for the replies!

To explain my situation a little better: I'm from the UK where i have a will.. although this was back when i owned a property... which I no longer do. I have no other things in the UK, no outstanding debts or physical things. I live in Norway now, where i also have no outstanding debts. I own no property and all my belongings (literally just a bit of furniture and boxes of "stuff") are all in a single storage unit.

I guess i just want to be sure that if i max out my UK credit card before i go, that it won't get passed on to my mum back in the UK

 

[Praestat_Mori]

I guess i just want to be sure that if i max out my UK credit card before i go, that it won't get passed on to my mum back in the UK

Idk about UK inheritance law but maybe your mum could be the one inheriting from you automatically. She would have to reject the inheritance. If she accepts it she'd also accept debt and would be responsible to pay it back.

 

[DarkRange55]

Yes.
When someone dies, their credit card debt doesn't simply disappear. In most cases, the debt becomes the responsibility of their estate. The executor or administrator of the estate is typically responsible for using the deceased person's assets to pay off their debts, including credit card debt. If there aren't enough assets to cover the debt, it might not be fully repaid, and the remaining debt usually doesn't pass on to surviving family members, unless they were joint account holders or cosigners.

** I'll be more specific.
The decedent's estate is responsible for the debt and the executor of the estate is supposed to pay off debt before distributing any assets to beneficiaries. If the estate doesn't have enough to pay the debt then the credit card company would absorb the loss.

I heard that if you have a lot of credit card debt, its actually cheaper to let it go to collections because they buy the debt from the credit card company for pennies on the dollar and they don't charge interest. (Of course our credit score goes in the toilet so its horrible if it goes to collections). But I was just curious if that first part is really even true or just a myth/misunderstanding?

Generally not a good idea.

Your credit score is based on a variety of factors, one of which is your credit history and timely payments. Yes, you will git dinged for going into collection, but the future costs (interest rates) that you will incur in the future will outweigh the cost you are charging off on your credit cards unless you never will borrow to buy (own) a car or house in the future. Your insurance costs for auto and home are also dependent on your credit.

My understanding is that collection companies can charge interest up to the amount originally agreed when the loan was taken - but not higher. And your credit is dinged. Not sure that's a viable debt avoidance strategy...

 

[AbusedInnocent]

If there aren't enough assets to cover the debt, it might not be fully repaid, and the remaining debt usually doesn't pass on to surviving family members, unless they were joint account holders or cosigners.

Can we just transfer everyone's debt to one guy and then kill them and have the banks take the loss? seemed to work pretty well when the christians did it with Jesus.

 

[DarkRange55]

Can we just transfer everyone's debt to one guy and then kill them and have the banks take the loss? seemed to work pretty well when the christians did it with Jesus.

Actually I can think of a few techniques, in a sense…

Credit is just another tool like a knife in the drawer. It can hurt you if you're not careful. But it is inherently neutral until you apply it.

I don't really like Robert Kiosaki but he does have a good point when he says for the rich and poor is the same reason: debt and taxes…

 

[DarkRange55]

Can we just transfer everyone's debt to one guy and then kill them and have the banks take the loss? seemed to work pretty well when the christians did it with Jesus.

If someone died with credit card debt but their assets were in some sort of trust, can the creditors still go after the estate or does a trust protect that?
My understanding is it depends on the kind of trust – a revocable trust could be invaded by creditors. An irrevocable trust would give protection against creditors? I believe there is a lookback rule (3 years?) so someone can't run up a bunch of debt and then put their assets in the trust for protection and then default on the debt?

Trust must pay debts of the estate but if funds are inadequate, the Trustee pays what he can proportionately until all the funds are used. Must notify the creditors of inadequate assets to pay all debt. There is a lookback period. Irrevocable Trust usually gets better protection and it also depends who the Trustee is. If an "independent" Trustee (Unrelated bank, CPA, Judge, ….), then better protection. If your own trust, then can be a problem if not setup properly before the lack of liquidity happens.



OJ Simpson put a lot of money in annuities to protect from civil liability (creditor procreation) when sued by the Goldman family.

Tax free (Life insurance payout) income can transfer to your heirs when you die. Your heir's trust can be the beneficiary of your life insurance payout, tax-free.
But other annuities are tax deferred (not tax free). Most investors avoid annuities due to the high fees. Annuities are expensive and we don't do them as a matter of course instead we just build a bond ladder to get the income people are seeking. Appropriate for some clients – just not necessary at the billionaire level. They have many other attractive options.

 

[DarkRange55]

If someone died with credit card debt but their assets were in some sort of trust, can the creditors still go after the estate or does a trust protect that?
My understanding is it depends on the kind of trust – a revocable trust could be invaded by creditors. An irrevocable trust would give protection against creditors? I believe there is a lookback rule (3 years?) so someone can't run up a bunch of debt and then put their assets in the trust for protection and then default on the debt?

Trust must pay debts of the estate but if funds are inadequate, the Trustee pays what he can proportionately until all the funds are used. Must notify the creditors of inadequate assets to pay all debt. There is a lookback period. Irrevocable Trust usually gets better protection and it also depends who the Trustee is. If an "independent" Trustee (Unrelated bank, CPA, Judge, ….), then better protection. If your own trust, then can be a problem if not setup properly before the lack of liquidity happens.



OJ Simpson put a lot of money in annuities to protect from civil liability (creditor procreation) when sued by the Goldman family.

Tax free (Life insurance payout) income can transfer to your heirs when you die. Your heir's trust can be the beneficiary of your life insurance payout, tax-free.
But other annuities are tax deferred (not tax free). Most investors avoid annuities due to the high fees. Annuities are expensive and we don't do them as a matter of course instead we just build a bond ladder to get the income people are seeking. Appropriate for some clients – just not necessary at the billionaire level. They have many other attractive options.

But you can borrow against them (annuities) so you don't have to pay capital gains. But they're also considered illiquid.

Someone claimed Michael Jordan had most of his money invested in insurance annuities. I have not read that and would doubt it. He owns golf courses, used to own part of an NBA team
(Charlottes), restaurants and other businesses. And I am sure he owns lots of other equity type investments plus bonds. He may have bought some annuities for his kids or something but most people buy annuities for the guaranteed cash flow and I don't think he has any cash flow worries. He has enough passive income from other sources.
He actually lived down the street from my ex and I when I lived in IL and his daughter Jasmine went to Hawaii and would stay with my ex at the same hotel as a kid.
When you reach the billion dollar status you have a ton of opportunities that normal people don't have and they diversify – your own tequila brand ala Ryan Reynolds, coffee brand ala George Clooney, partnerships with major corporations, etc.

Basic investment rule diversify with bond, equity and real estate investments.
30, 40, 20 and some cash.
But when you're young, all equities (always have a cash emergency fund). You pivot into bonds as you get closer to retirement.