Does credit card debt pass on to children?

cardsA common question I get is whether a mother’s or father’s credit card debt is passed on to their children when the parent dies. The answer is no.

Children are not liable for their parents’ debts. When someone dies, credit card companies or other creditors have the choice to simply write off the debt or to try to be paid by the person’s estate. (The estate is any money or assets that the person left behind, whether in cash or in property.) So the credit card company might get paid from a parent’s leftover assets, causing the children to inherit less money. But the payment won’t come out of the children’s pockets.

There is no doubt that credit card companies want to get paid, and they will do what they can to see that happen. Whether they put forth the effort to collect unpaid debt from an estate will generally depend on how large the debt is. I know of one case personally where a credit card company settled with the children of a deceased parent for a lesser amount than what was owed. Why? Because the process of getting money from an estate can be lengthy, and if there are other creditors seeking money, there is no guarantee that the credit card company will be paid at all.

One last thing to remember: credit card debt is unsecured, meaning there is no collateral put up to guarantee repayment. Therefore, credit card companies allow consumers to go into debt knowing that eventually some percentage will die with card debt. While they may try to collect what they can, they also see this as a cost of doing business — a form of bad debt that the card companies are willing to accept in order to make the big profits while their customers are alive.