To all lawyers- Hypothetical question: What happens if you die while owing money

Factual Questions
1

My friend and I got into a debate over this. I searched the archives and didn’t see this answered anywhere. Here is the hypothetical situation

Jim lives in the US. Since this is hypothetical the state doesn’t matter. Jim lives at home with his parents, has a job, no kids and is not married.

Jim has 3 credit cards with a limit of 25,000 each. No one cosigned for the credit cards.

Jim, maxes out the cards, and before he can make any payments goes out buys dinner, cooks it alone chokes and dies

So now Jim is dead he owes 75,000 to his credit card companies and because he didn’t have any insurance his estate is only worth 10,000

  1. Are the credit card companys entitled to the entire amount of his estate
  2. Are any of his family members liable for the outstanding balance
2

I’m not sure I follow your logic in saying that the state doesn’t matter because the question is hypothetical. Unless you are going to give me hypothetical law to apply (which law school exams sometimes do), if you want a answer that means anything, you should identify the state you’re interested in.

That said, in every state that I’ve heard of, the general answers to your questions are 1) yes; and 2) no.

There is a possible nuance (and this is where knowing the state would be handy) which might apply if your state has a family expense statute. These vary, but under some circumstances, a family member can be held liable for the debts of another family member, but only if the debt is for a necessary household expense.

It’s also worth noting that the credit card companies would share the estate with other creditors, which might include the provider of burial services.

3

This reminds me of a telemarketer for Citibank who called about trying to sell me “credit insurance” for my card.

It went along these lines:

ME: I’m sorry, I pay off my balance every month, and I don’t carry any long-term debt. I don’t need insurance.

TM: Well, if you die, this protects your family from having to pay the high credit bills you might have.

ME: Well, if I die they should pay the bills - after all, I owe the money don’t I? And I never charge something I couldn’t afford out of pocket.

TM Yes, but do you want you family being faced with paying off your bills?

ME: Well, yes actually, I would like to be thought of as a person that pays their bills, even in death. Besides, my family is not liable for my bills - they are not on my credit card.

TM: Oh yes they are, we can get it from your husband (ha!), children, parents, even your grandparents.

ME: (I explain to this loser the top 10 reasons why this is not true, and ask to speak to his supervisor)

TM: Well, all I know is someone’s gonna pay, and it’s not going to be Citibank (CLICK! Dial tone…)

And then I called back and cancelled my card.

4

Ok I don’t know about laws, but I was under the impression that unless a contract is signed stating that someone else will be responsible for your debt if you die and your estate doesn’t have enough to cover your debt the people/companies you owe money to are out the amount your estate can’t cover

I’m in New Jersey and what my friend told me that his fater had to pay a debt that my friends grandfater owed when he died. The grandfater was a canadian resident and my friend’s father was living in the US. I told himeI don’t knopw about international laws but I was under the impression that only you are respmosible for your debts unles they are taken on jointly.

5

Agreeing with Random’s comments, but adding a few thoughts:

  • Your family is generally not liable for your debts, however, for example, if one of your parents was a co-signer on the credit cards, then they would [hedge]presumably[/hedge] have to pay off your debts

  • Most large loan operations (home mortgage, car loan, etc) tend to offer you “mortgage insurance” or “loan insurance” or some variation. The aim here is to protect your estate. Broadly speaking, such insurances are a bad deal – the longer they go on, the more premium you have paid, and the lower the benefit. If you want to protect you estate, far better (almost always) is to buy a regular life insurance, not a decreasing amount.