Credit card debts after a death

One of the common questions that are asked about credit cards is what happens to credit card debts after the card holder has died.  It is not always clear, but there are a few things that can help a person know what they should be doing.  The legal situation can change slightly in the state or territory.

Credit cards are unsecured loans; in effect this means that they are secured on the assets, earning power and reputation of a person.  This means that if a person dies then the state of the credit card debts are quite important.
The first thing that happens with a credit card user’s credit card debts after they die is that they go into the person’s estate.  This happens with all the un-discharged debts.  If there is more money in the estate than the person owes then the debts are paid off in total and the heirs get the remainder of the estate divided amongst them as in the will, or provisions of state law regarding people who die without making a will.  If there is less money in the estate than the debts then the debts are paid off in proportion to how much was owed and the heirs do not get anything.  Although there are a few circumstances in which survivors may have to still pay, in the main the survivors will not have to pay any debt that is left over after this process.
There is a slight difference with co-signatory cards.  In these cases there are two people who sign a credit card, the main user and a co-signatory who essentially guarantees the debt.  Both the people on the card are liable to the debt on the card.  This will mean that if the guarantor dies then the main holder of the card is still liable for the debt and if the main holder of the card dies then the guarantor becomes liable for all the debt.

Secured cards are another area where there may be some liability.  If a card is secured on some property that is jointly owned then the card will have to be paid off in full before the person gets full title to the property.
One area where people can get confused is with consolidation loans.  Although a person may have built up their debt through credit cards, if this debt is a secured consolidation loan then the house will probably be sold off to pay off the loan.