Tammy Broccas May 13, 2018
credit cards

Have you ever wondered what would happen to credit card debt if you die? Do your spouse, kids or relatives inherit your debt? Or does your debt die with you?

According to Credit Cards NZ, a New Zealand credit card comparison website, about a 3rd of all New Zealanders are unaware of what happens to their debt when they die – that’s a bit alarming.

What happens to your credit card debt when you die depends on a few factors, so let’s take a look at some of these factors and how your debt may be dealt with after you die.

Unsecured debt

Credit cards are considered unsecured debt; this means there’s no asset tied to the debt. When you die, this makes it more difficult for creditors to collect on the debt. However, they may still be able to get paid by taking the matter to the court to recover their money from your estate.

Contacting financial institutions

When you die, a relative will need to notify each of your financial institutions (banks, credit card and loan companies, etc.) of your death. These institutions usually have bereavement specialists who will help your family member through the necessary steps of dealing with your estate.

The bank will ask your relative/executor for specific information about you (as the deceased) and may even ask for a certified copy of the death certificate and possibly your will.

Your financial institution may also ask your relative or executor to fill out a “deceased state notification form”. The form includes the following information:

  • The relative’s name, their relation to you, their address and other contact information
  • Your name (the deceased), address, date and place of birth
  • They will ask if there’s a will and for a copy of the death certificate

Next, your bank will review your assets and debts, then look to see if your assets can be applied to any outstanding debts you may have had. If there’s enough money to cover your credit card debt, the bank will pay this off and then release any leftover to your heirs (also called beneficiaries).

Your executor or administrator needs to call all your credit card companies as soon as possible after your death. After they’ve been notified of your death, the credit card company will usually freeze the account, which keeps additional interest from accruing.
 

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