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hey there I'm Paul rappley and in this video we're gonna talk about whether children are responsible for the credit card debts of their deceased parents okay so you know when people hear estates they think you know lots of money millions of dollars large estate big old house heirs just you know collecting lots of money but not every estate is quite so clean sometimes yeah you know somebody dies and they have assets maybe a home and they may maybe they've had a car and they may have even some bank accounts but in these in some of these estates there's also you know some debt sometimes a lot of debt you know there's sometimes a home mortgage sometimes there's car loans and then sometimes there's credit card debt so when in this video we're going to look look look at how or when the heirs are responsible for the debts and and in this example I'm let's just say there's a there's a dad and maybe he had a will and maybe he did not but he had three years maybe he had a will and left everything to his three children or maybe he didn't have a will and by law his estate goes to his three children so first thing right off the bat I'm gonna I'm gonna clear this up and you know I hate to say this but I'm here in Louisiana and if you're watching this and you live or are dealing with in the state and in another state you really ought to check with an attorney and that state laws can vary from state to state but no the first first thing I'll say is you know children or heirs they're they're never you know personally responsible for the debts of their parents even if the parent had a will leaving their estate to the child the child's not gonna have to come out of pocket to pay for the debts of the parent unless the child signs something to obligate themselves to pay that debt so we get that every once in a while you know when Dad dies and a child you know maybe co-signed on a loan for dad or a credit card and dad dies no assets but debt and and the child's wondering you know why they have to pay that debt well they they obligated that they they signed the paperwork to obligate themselves to pay that debt so we don't see that a lot but the general rule is you know parents debts don't pass along to the children where the children have to come out of their own pocket to pay their parents debts so let me get into that in a little bit more detail so you know if if dad had a will any-any left his estates to his children any and he had let's say he had $200,000 in debt and his his only asset was a $60,000 bank account and right after dad died because maybe a child's name was on dad's bank account as having signature authority right after the dad died one of the kids went and cleaned out his $60,000 bank account but dad still has two hundred thousand dollars of debts well the the children are gonna may be in a position where they're going to have to kind of give that $60,000 back to pay off some of dad's $200,000 of debt now the kids aren't gonna have to pay their own money back but to the extent they got $60,000 they you know there's all the authority in the law on the law that says they they're gonna have to give that back if if the whoever was owed that $200,000 pursues their claim so let's look at credit cards and a little bit more detail and at the end I'll have some advice for you as to what to do if you had a loved one who had you know several you know credit card debts outstanding so when there's debt you know at the at the top of the priority chain are things like a mortgage which is secured by the home or property or maybe a car loan that is secured by the vehicle and then below them are the credit card companies those are unsecured debt behind the mortgage behind the our car loan lenders so let's let's look at an example where you know dad died he had a home it was worth $200,000 but he still had a $100,000 mortgage he had $15,000 car still had $10,000 he owed on the car and then he had eight different credit card accounts and the total of those were $40,000 that he owed on those two those credit card companies so what will happen there is you know the estate or the executor of the estate or the court-appointed administrator of the estate if dad had no will gonna have to go through a process you know sell that home pay off that hundred thousand dollar mortgage that happens you know automatically when the home gets sold because it's a secured debt probably sell the car for fifteen thousand dollars or something like that pay off the ten thousand dollar car loan and then that those funds that are available or are part of the estate would have to be used to pay off the forty thousand dollar credit card debt before you know anything can be divided up among the three children so if we do the math sold the two hundred thousand dollar home paid a hundred thousand dollar mortgage so there's a hundred thousand in cash left sold a fifteen thousand dollar car paid off ten thousand dollars a debt that's another five thousand of cash so there's a hundred and five thousand dollars of cash forty thousand dollars of credit card debt leaving sixty five thousand dollars to be divided up among the three children if that's the case all right so it is interesting to note however that some credit card companies there's no authority in the law for this whatsoever maybe these credit card companies are making business decisions but some credit card companies will forgive the debt of the credit card account holder who died and and had a balance on his or her credit card like I said before I must say it again there's there's no authority in law where the the heirs can require that credit card company to just forgive the debt that is do but sometimes and and and maybe they do it for two reasons either they don't want to go hire expensive lawyers to have to file claims in the estate that would be necessary in order to collect the $2,000 credit card balance or the $10,000 credit card balance or maybe they're just doing it out of goodwill because they don't want to get a bad name I doubt that I think it's more of the former than the latter but in some cases credit card companies will either accept pennies on the dollar to close out an account on behalf of a deceased person or sometimes you know we've had many children of deceased you know credit card account holders come in and say we called the credit card company they just told us to send them a death certificate which we did and they forget forgave the balance so again no obligation that they have to do it but but you know there there's a what does the law say and what's practical we kind of see on that practical side that you know credit card companies I think they just don't want to mess with all of the bureaucracy and procedure of trying to collect a debt through a succession or through a probate or through an estate so this is rated or accept pennies on the dollar okay so it gets more complicated though when you have that scenario where there's a home with a mortgage and a car with a car loan and there's more debt than remaining cash or maybe there is no you know home with the mortgage or car with a car loan let's let's say for example or let's say there is sell the car sell the house but even after you sell the home and sell the car after you paid off the home mortgage and the car loan let's say there was only forty thousand dollars of cash remaining and then there's 80 thousand dollars of credit card debt there might be fifteen credit card companies well what does the law say there forty thousand dollars of cash eighty thousand dollars unsecured debt in theory every every credit card company or you know unsecured debt they're gonna get half their money because there's only $40,000 of cash but $80,000 of debt the mortgage company is going to get paid in full the car loan lender is going to get paid in full and then the credit card company you know they they'd be those debts would be charged ratably is what our law says so bottom line on that is when you're involved in a state and maybe a parent passed away and there's some credit card debt I do think it is important that you communicate with the credit card companies I do find them to be somewhat lenient when they find out you know a child call says let my father my mother passed away I understand they have a balance I do find that they are sympathetic in many cases where they'll stop accruing interest or you know if there's no payments made for some time they're not gonna go crazy now look everyone's different so feel free to share your experiences in the comments below everybody can benefit from that but I will say that you know if the estate has assets the estate is responsible for paying those debts in some cases credit card companies are willing to accept pennies on the dollar dollar or or just forgive the debt entirely to kind of quote/unquote get it off of their books so feel free to explore that as an opportunity and but that should give you some guidance on this difference of an estate debt when it's secured versus unders unsecured the secured debt you know is is higher in the priority chain than the unsecured debt know that heirs never have to come out of their pocket to pay for the debts of someone who died but if the heirs received an inheritance and following the proper procedures you know debts surface and air may in certain circumstances be obligated to give that inheritance back in order to you know pay for that debt if it's you know if the creditor you know followed all the procedural rules like so hope that helps on a little bit on estate debts it's just you know part of life and death some people die and they have have some debt have some significant debt and so it's just an issue not necessarily a fun one but one we have to deal with from time to time it happens all right y'all have a great day take care