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Credit Debt & Death In The State Of CA

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dugbowen

Junior Member
#1
What is the name of your state?What is the name of your state?What is the name of your state?What is the name of your state?What is the name of your state? California

If a credit card debt(unsecured credit) is in the name of only one spouse and that spouse dies, is the surviving spouse responsible for the debt? Is the estate responsible for the debt? Is there an exemption related to certain assets, from unrelated liabilities of the estate? In other words, the debt directly related to the asset, such a mortgage on a home or an installment loan on an automobile would be assumed, but a credit card debt would not be paid from the estimated value of the exempt assets. Does California law require(allow banks to collect from the) proceeds of a life insurance policy, to pay the credit card debt(unsecured debt)? The estate will have a very limited amount of assets and the surviving spouse will need the assets, so can the credit card liability be eliminated, without payment?
 


#2
If a credit card debt(unsecured credit) is in the name of only one spouse and that spouse dies, is the surviving spouse responsible for the debt?
Generally yes. Exceptions may include if the credit card debt was acquired prior to the mortgage, or if the credit card debt was a) used only for the benefit of the one spouse, and b) the credit was granted on SOLELY the one spouse's credit score and income, and c) the bills were paid with seperate (not community) funds -- in those cases, the credit card debt would be for the one spouse only. This is a very narrow exception, and such a result would be pretty exceptional.

Is the estate responsible for the debt?
Well, as noted above, generally the surviving spouse is responsible for the debt. But if the exceptions above hold and only the decedent spouse is responsible for the debts, then the estate would be responsible to pay out the debts, to the extent of the value of the estate.

In other words, the debt directly related to the asset, such a mortgage on a home or an installment loan on an automobile would be assumed, but a credit card debt would not be paid from the estimated value of the exempt assets.
See above.

Does California law require(allow banks to collect from the) proceeds of a life insurance policy, to pay the credit card debt(unsecured debt)?
No, but. If the exceptions above hold, and the decedent spouse is solely responsible for the debts, then the life insurance would not be tapped to pay the bills, as the life insurance proceeds are not part of the decedent's estate, and go directly to the beneficiary.

But, if the surviving spouse becomes liable for the debts, as is almost certainly the case, then the insurance proceeds will go to the surviving spouse, and once the surviving spouse has received the proceeds, the proceeds could potentially be tapped as another source to pay off the bills, just like any other assets the surviving spouse may have.

But the banks won't (or can't) take the proceeds directly -- its just that once the beneficiary has the proceeds in hand, they become just another asset that the person can use to pay debts.
 
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