Is mom liable for my dead father’s credit card debt?

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Q. My father recently passed away and we discovered he had a large credit card debt on a card in his name. My mother wasn’t aware of it. All assets are in both of their names. Is my mother liable for the credit card debt?
— Daughter

A. We’re sorry to hear about your dad.

As a grieving family the last thing you want to deal with is unpaid debts and debt collectors.

As a general rule of thumb, unpaid debts are paid from the deceased person’s estate, said Lisa McKnight, a certified financial planner with Lassus Wherley, a subsidiary of Peapack-Gladstone Bank, in New Providence.

She said in New Jersey, family members, including the surviving spouse, are not typically obligated to pay the debts from their own assets unless they have co-signed the obligation.

But here’s how it works — practically.

Everything a person owns at the time of their death, including everything from money in the bank to their possessions to debts they owe, is collectively called an estate, McKnight said.

“If the deceased person has debt, then the executor of the estate will go through a process called probate,” she said. “During the probate process, bills are paid off using the estate’s assets.”

Certain assets, such as retirement accounts, may not be included in this process and therefore cannot be used to pay creditors, McKnight said. Other assets can be sold in order to pay off outstanding debts.

Typically, she said, a relative or the estate executor will notify any lenders, including credit card companies, when that person dies. The credit card company will then notify the estate executor of any balances due.

Importantly, the entity cannot add any additional fees while the estate is being settled, she said.

“If there is not enough money in the estate to cover credit card balances, the card issuer may be out of luck,” she said. “Unlike some debts, such as a mortgage or a car loan, most credit card debt isn’t secured. In these cases, the card issuer may have to write off that debt as a loss.”

McKnight said you should start learning about the New Jersey probate process as a best defense for dealing with creditors and debt collectors.

If you need help, consider speaking with an estate planning attorney.

Email your questions to moc.p1591250708leHye1591250708noMJN1591250708@ksA1591250708.

This story was originally published on Jan. 15, 2020.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.