Credit card debt: after death

Hi all,

I won’t go into the long backstory here, but what happens when a person passes away when it comes to credit card debt? Is medical debt different? My brother with terminal cancer signed a will that creates a testamentary trust upon his death where his assets will be automatically transferred. Are these assets protected there? Who do the creditors go after?

no, debts need to be paid by the estate before anything can be transferred.  the creditors go after the estate, if there is no money/assets and no coborrower, the creditors get nothing.  if the debts can only partially be paid, they only get partial payment

Does that apply to life insurance proceeds? Are beneficiaries obligated to pay debt with payout?

jmitw said:
no, debts need to be paid by the estate before anything can be transferred.  the creditors go after the estate, if there is no money/assers and no coborrower, the creditors get nothing.  if the debts can only partially be paid, they only get partial payment

 I forgot about co-borrowers co-signers.  Someone co-signs to help a friend or relative. The friend or relative dies and the co-signer is on the hook.

Formerlyjerseyjack said:
Does that apply to life insurance proceeds? Are beneficiaries obligated to pay debt with payout?

 In most cases - no.  death benefits are paid to the beneficiaries and debt is not transferred to the beneficiaries.  However if there is no beneficiary named it would go into the insured's estate.  

Part of the reason why there are CC fees and high interest rates are for some of the benefits as well as losses.  Some CCs specifically have a built in death benefit that is equal to the amount owed on the CC.   It is like the benefit where some CC's allow you to rent a car and not take the insurance.  

no, life insurance does not have to be used to pay debt....doesn't seem right, but that is what I was told