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Dying with no assets, but with credit cards

Posted by stevieboy (My Page) on
Thu, Apr 13, 06 at 19:40

No one is sick, no one is dying, no one is dead.

You always hear how credit card companies have to eat the money when someone declares bankruptcy or charges are contested, and it got me thinking.

Let's say someone is renting an apartment, just scraping by, they have very little or no savings and no big assets like a house or property. What they do have is thousands of dollars of credit card debt. What happens to that debt if they die? Does the credit card company eat the money?

Again, this is hypothetical. Thanks for your thoughts.

Steve


Follow-Up Postings:

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RE: Dying with no assets, but with credit cards

My aunt died in February leaving a lot of debt and little estate value. The first thing that occurred was that they notified her credit card companies. The cc companies asked if her estate could pay the debt. We told them no (truthfully) and they said fax over a death certificate. We did and the debt was cancelled. The same with the cell phone bill and all other bills. Her cc debt was in the neighborhood of $10,000 total. The little money she had in the bank did not cover her funeral expenses, which by law in NJ are paid first before all creditors. I should also add she did have a pension which was NOT considered part of her estate and which went to my sister and was not accessible to creditors.


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RE: Dying with no assets, but with credit cards

Wow, thank you for posting this question. This is something that concerns both DH and I very much as DFIL is spending a lot of money of frivolous things, and therefore his pension and SS is not enough to support his lifestyle, so we suspect that he is charging up a storm on his credit cards.

DFIL is in good health and will be with us for many years to come, but both DH and I are concerned enough about what may face us later financially that we considered talking to a lawyer later this year about this.

I know I am no help at all to the OP, but I am very interested in other replies.

Skrepka


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RE: Dying with no assets, but with credit cards

my parents and i have been discussing this same thing lately. my grandmother has gone crazy with her cards and run up well over 30k on them. due to recent health issues she had my mother started paying her bills for her and discovered this. she refinanced her house( owed less than 5000 on it and took out an additional 58k to pay off her cards and do some improvements) about 3 years ago and the payoff for the house is basically what it is worth. needless to say she ran the cards right back up after paying them off. she has about 1200.00 a month income, and her MINIMUM payments total to 1800.00 counting her house note. this is before any groceries or utilities. best we can figure is she is using one card to pay another. my parents are concerned that they will be stuck with almost 100k of debt should something happen to her.

there honestly is almost no way she could live long enough to pay this off, as she is 80 now. i can't figure out how she was able to refi for 15 years at age 77!


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RE: Dying with no assets, but with credit cards

davidandkasie,

I understand your situation, but if I read your post correctly your grandmother OWNS the house and that is a big asset that would be drained away to pay off debts. My question is about people who own no large assets which could be siphoned.

Not attacking you, just clarifying and trying to redirect the conversation.


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RE: Dying with no assets, but with credit cards

My mom died two years ago. She lived in a mobile home shared with my sister, with both of their names on it, so Sue got it in full when Mom died. Sue had been writing Mom's checks for some time, since Mom was blind at the end. She paid the bills as they came in and when Mom died there was only about a thousand in her accounts. Sue used some of that to pay back Social Security (Mom died in the middle of the month and SS got their payment back). The rest paid her monthly bills just as she was dying. Mom died owing her Discover card a thousand or so, and another card a little more than that. She owed me $4000 for replacing her plumbing when the insurance company cancelled her after her umpteenth leak.

We saw an attorney, and he confirmed what I had learned on these forums - that Mom's two life insurance policies were not part of her estate, but were the property of the beneficiaries. He advised us to tell all creditors that there was nothing in the estate and to not promise to pay anything. Once you agree to make a payment on a bill, you can be assumed to have agreed to pay all of that debt. And if one credit card company learns that another was paid, they can demand to be paid.

My brother and sister and I split the cost of her cremation and memorial lunch. Sue got enough life insurance money to pay off the mobile home and her biggest debt, and Charlie and I got a small amount, as well. It was interestng to learn that the insurance companies did the splitting of the insurance policies, so each received exactly what we should. It saved debates about splitting things up. We were very fortunate to be in accord about everything and did not have to suffer through bad feelings like some families do. We were grateful that Sue was able to start off her independence without crushing debt. Mom was smart to do that for her.

Just as others have said, we sent copies of the death certificate with letters saying that there was no estate.
All of the creditors disappeared at that point.
When the time comes, you will be asked by the funeral home how many "true" copies of the death certificate you need. Get a few more than you think you'll need, just to be sure.


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RE: Dying with no assets, but with credit cards

Steve - Credit card companies have Probate departments that determine if they will file a claim against the probated estate. If there is no estate or assets there is nothing the company can go after.
Davidandkasie and skrepka - unless you and your dh or parents are co-cardholders the credit companies CAN NOT hold you responsible for the debt. They may try, hoping the person isn't aware that they aren't responsible and will pay. There are allot of collectors out there that push the line, their main job is getting money and will try any and all tactics to get it. If something was to happen to your family members and the credit card company tried to collect from you or your parents because there is no estate, tell them unless they can provide a signed application with your SS# proving you are responsible STOP bothering us.
Unsecured debt is just that
Also remember that credit card companies have litigation departments that review accounts that default ( I worked in the litigation dept for a major credit card) they are reluctant to sue people on SS should they go into default because SS income can not be garnished They would check to see if they have property equity that could have a lien attached should they get a judgment, but remember the mortgage or mortgages if there is a second would be paid first. These defaulted accounts usually end up being sold to 3rd party collection agencies. So the worst that could happen if someone charges up allot of debt and goes into default with no assets is annoying phone calls from collectors. This can be stopped with a do not contact letter.
The answer to your "i can't figure out how she was able to refi for 15 years at age 77!" question is easy if your grandmother had good credit, and available equity the bank realized that they could make money on the interest and they know that if something where to happen they get paid first.
Karla


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RE: Dying with no assets, but with credit cards

so if i understand this right, when i`am old and only have a few yrs left, i can run my credit cards to max, live it up. since i have no heirs. anything that might be left will be used to pay off credit, and if i spend it all, i win! live the high life, make the minimum payments. then die. well old age is looking up!


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RE: Dying with no assets, but with credit cards

Yeah, pretty much, Bill. And even if you have heirs, they do not have to spend their life insurance money from your death to pay off your debts if they are the beneficiaries and not your estate.


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RE: Dying with no assets, but with credit cards

scary isn't it. what the credit cards count on is people not knowing this.
karla


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RE: Dying with no assets, but with credit cards

Ultimately it gets passed onto merchants and then onto consumers. Essentially we all end up paying.


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RE: Dying with no assets, but with credit cards

to clarify, my grandmother owns her house, but hte payoff of the mortgage is about equal to what it would sell for. the neighbor hood used to be real nice, but has become a lower income area now. she could have sold for a tidy profit just 6 years ago, but now would have to settle for breaking even. at her age she has no life insurance, but she has already prepaid all funeral expenses.

from what i have read here, the problem with her credit cards may not be a problem at all. She is now seriously considering selling her house. once she does, we may try to talk her into filing bankruptcy but she is the sort of person who would not feel right about doing so. she says i owe it, i pay it. which really is a good policy, but bankruptcy is probably her only way out of debt while still alive.


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RE: Dying with no assets, but with credit cards

davidandkasie- first thing does she still have access to the credit cards? If so you mother needs to explain that she has to stop using them and cut them up.
If she sells the house where would she live? Also to consider if the house value is equal to what it would sell for it may end up she is negitive with closing costs and realtors fee. Unless she was to move in with a family member you have to compare what she is paying in mortgage payment vs rent. Since you mother is now handling the bill paying I would figure out what she needs to cover her living expenses(housing food utilies etc)if there is anything left you could tell her she could divide that among the credit cards. Granted it wont cover the min payments but at least she would feel like she is paying them something. If this is the route she decides to take she will need to either send a letter explaining that due to financial distress she will pay what she can and to request no contact.The collectors at the CC don't care if she is 40 or 80 their job is to get payment. There is no equity in the home that the CC company could lien. If you decide to look into a BK remember if there has been usage on the cards in the past 6 to 9 months the credit cards companies may decide to contest the BK. Also with the new BK laws she would have to have credit counsling. You also have to remember that a BK will probably cost $1200 or more.
I am not advocating that everone go out and run their credit cards up in hopes that if something happens to them the family doesn'y have to worry. but your GM is 80 I dont think she should have to chose between eating and taking needed medication to paying the credit cards.
Thank heavens your mother was able to find out what was going on before it got even worse and your GM was being bombarded by calls and letters. I know it can be a touchy situation but folks with older parents need to keep an eye on these things. When I was running a bankruptcy alternative team at a major CC company I cant tell you how many calls I got from older people that were in sudden financial distress due to losing their money to the scam artists out there that prey on older people.
Karla


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RE: Dying with no assets, but with credit cards

thanks, she is seriuosly considering moving in with my parents, they already have a room ready for her. It is just a matter of getting her to move. The real sad thing is that my cousin's ex-husband and 3 kids live with her and pay her NO money. he buys groceries once a month and gives her use of his second car to run his kids around to their events, but does nothing else. and yes, you read that right, he is not family he married and divorced family!

My parents and i were discussing it last night and are going to propose that she move in with them, let us fix the cosmetic issues with teh house, and then sell it. this will get her a little money after pay-off and closing costs, though probably not much. as for him and the kids, they will be forced to move in with his fiance or rent a place. he still owns a house, but his fiance does not want to live there since he and my cousin bought it when they were married.


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RE: Dying with no assets, but with credit cards

david
this may be out of left field, but are you sure that your GM ran the cards up? If your cousins ex is taking advantage of her generosity by living there rent and expense free it makes you think. Also make sure that he dosnt try to talk her into staying since he would lose his babysitter. Your parents need to present that her moving in with them will be a big help for them. We are having that with my dh gm she is 94 and her one daughter wants her to move in with them and the only way they will be able to not make her feel as if she cant live on her own is to have her think it will be a big help to them
Karla


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RE: Dying with no assets, but with credit cards

yes, she ran them up, but it was not on stuff for herself. it was for the kids and she bought EVERYONE nice christmas presents a couple years in a row. normally she would spend 20-30.00 per person, but those 2 years she spent closer to 125.00 per person, on at least 12 folks.


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RE: Dying with no assets, but with credit cards

Karla,

You sound quite knowledgeable on this subject. Did you encounter cases of cardholders dying with debt while you worked for a credit card company, or is this just information you picked up from being in the industry?

I find this topic, and these replies, fascinating!

stevieboy


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RE: Dying with no assets, but with credit cards

Stevie
after 30 years in the "business" (collections, bk alternative litigation and foreclosure) not only do you learn allot, but nothing surprises me and the stories I could tell lol .
While I was on the litigation team we sat next to the probate team and lol I like to ask allot of questions. I felt the more I knew the better I could be at my job. I didn't want to be one of those dreaded "collection" people. I went out of my way to be able to offer options and help people get out of their situations. don't get me wrong I'm not a pushover if I ran into someone who purposely went out of their way to run up credit cards knowing they couldn't pay I had no patience. but there are allot of people that get into situations beyond their control that just don't know they have options.
after we were married I casually asked my MIL what her interest was on her mortgage . I found out she was paying rates from the 80's when they were much higher well lol within 30 days I had her refinanced to a rate 1/3 of what she was paying and with a shorter term.

My DH jokes to people that there are 3 subjects not to get me started on Credit, getting out of debt and greyhounds.
Karla


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RE: Dying with no assets, but with credit cards

my bf dad passed passed away in feb. His doctor bills are close to 100K, will the family be responsible for paying all of those bills or will the hopital have to write them off due to the fact that he had no assets at the time of his death?


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RE: Dying with no assets, but with credit cards

so if i understand this right, when i`am old and only have a few yrs left, i can run my credit cards to max, live it up. since i have no heirs. anything that might be left will be used to pay off credit, and if i spend it all, i win! live the high life, make the minimum payments. then die. well old age is looking up!


I agree, pretty much true.

My BIL died last summer with a bunch of dept and ZERO assets. CC will call relatives, then eventually companies that try to recover from estates will call. These are no nice people and you should not talk to them because you are not responsible for the debt. Basically, they all want to know if their is a probate case and any assets. Once they are assured there is NOTHING they usually go away.

I did not feel particularly bad for the CC companies; they gave a bunch of credit to a person with addictive behaviors who was on SS disability. All they had to do is run a credit report to figure out he had no way of paying.


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