Can credit card debt transfer to your children after your death?
January 19, 2009 - An older family member of mine has a large amount of credit card debt and their only major asset is the house that they currently live in. From what I've read it seems that creditors will liquidate all of their assets including the house in order to try and cover the debt upon their death.
One of their children wants to purchase the house or assume the mortgage from them now and become the new owner. If the house is sold/transferred in this manner and no longer belongs to my older family member with the large debt, will creditors try to come after her child upon her death?
The house is located in Florida.
First of all, in Florida, you can file for homestead exemption if it is the primary residence, which means that no one or anybody can take the house for payment of debts even with a judgment. Creditors can not go after the children for credit card debts. If there is no surviving spouse, then an executor would be appointed to handle the estate. The executor would have to sell any assets (excluding the house) to pay any outstanding debts. The debts are to be paid according to their priority such as IRS, State Taxes, Liens, Judgments. Credit cards are the last in line and most will simply charge off the debts. Hope this answer is of help to you LEGAL DISCLAIMER: The answer provided here is intended for informational purposes only. It is not intended nor presumed to be legal counsel or professional legal advice
First, they cannot assume the mortgage, they will have to get their own mortgage. If the house is sold at market, and is a true sale (ie deed is in the relative's name) then this can work. However, if the current owner dies very shortly after the sale, the credit card company might try to claim that the sale was not true. But overall, there might not be much point in doing this. If the sale price of the house is less than the mortgage balance, the bank will probably not allow the sale (this is a short sale). If there is no mortgage, or if it is smaller than the value of the house, the current owner will have the excess cash anyway and unless they are planning to spend it all while keeping the credit card debt, this will go to the credit card company on their death to cover the debts.
They better transfer the house before the death of this individual because you are right they will come after the estate of the deceased. If the child purchases the house from them the seller needs to keep the money out of the banking system otherwise that money would now be the asset. But I'm sure you already know that. Once the person is deceased the only thing the child needs to do is open the letters send a copy of the death cert. (it doesn't have to be certified unless they contact them and ask for one) and also include a note that says Deceased has no estate. I've never after 2 1/2 yrs had any of my father in laws creditors write me again.
Knowledge Base: Credit Card Processing
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