After one spouse dies, card debt likely affect the other

If there are assets, living spouse will be impacted

Question for the expert

Dear Credit Wise,
My name is NOT on my husband's credit cards. He owes a sizable amount. If he passes away, am I held responsible for to pay balance? -- Angela

Answer for the expert

Dear Angela,
The answer to your question is, it depends on the state where you live, and whether there are assets that can be claimed. In most states, you are not responsible for the debts of a deceased spouse unless you are a joint owner of the account. Since you say your name is not on the cards, it seems to be the case that you are not a joint owner.

However, if you  live in a community property state -- Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin and, in some cases, Alaska -- you could be responsible for the debt should your husband predecease you before the debt is retired. Community property rules state that a debt obtained by either the husband or wife during a marriage is recognized as a joint debt. This will be true even though your name is not on your husband's cards if you live in a community property state: If his debt was accumulated during your marriage, it's yours.

When a person dies, all outstanding debts are transferred to the deceased's estate. This means if your husband dies before you, anyone he owes will be entitled to make a claim for payment from his estate. Since you have said that the amount due is a sizable one, the creditor will likely make a claim on the estate fairly early. 

If there is not enough money in the estate to pay the debt, and you don't live in a community property state, it will go unpaid and you are not responsible. In a community property state, you will be held responsible and the creditor will come after you.

If there is enough money in the estate to pay the debt, the situation is different. The executor of the estate -- and in many marriages, that's the surviving spouse -- will be expected to pay the debt, whether it's a community property state or not. So if there are other assets, you will be impacted by the debt, whether or not you owe it directly.

I don't know whether your husband has a will that instructs how his estate should be handled, but broadly speaking, state laws generally give a surviving spouse rights to claim the assets of the spouse who died. If you expect to inherit the assets of your husband's estate after his death, there won't be as much to inherit after the card debt is paid.

I would encourage you to have a frank discussion with your husband about his debt. If you live in a community property state, this discussion is even more important since you likely would be responsible for the debt. Encourage your husband to come up with a plan to stop using the credit cards and repay his debt in a timely fashion. The first step -- stop using the cards -- may be the hardest, but is vital in order to get out from under the debt.

A call to a qualified nonprofit credit counseling agency could help your husband with a repayment plan. After a budget review, the counselor will be able to give your husband his options for taking care of his debt. He may be able to work directly with his creditor to come up with a reasonable repayment plan or even settle the debt for less than he owes. This will depend on your husband's relationship with his creditor and what he is able to offer. Credit counseling agencies also offer debt management plans, which might be a solution. These plans generally offer lowered interest rates and even lowered payments in some instances, with a payoff time of five years or less.

Other options include selling assets to pay off the debt. Bankruptcy is a last resort, but exists for a reason and is another option that might be discussed with a credit counselor. Qualified agencies can be found through either the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling.

Be wise with your credit!

See related: What cardholders should know about community property laws

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Updated: 01-23-2018