What happens to credit card debt during estate administration?

On Behalf of | Jan 17, 2024 | Blog, Probate And Estate Administration |

During the estate administration process in Pennsylvania, the handling of credit card debt requires careful consideration.

When someone dies, the executor of the estate is responsible for notifying creditors. Creditors have a specified period to come forward and submit claims against the estate. This step helps account for all outstanding debts, including credit card balances.

Debt priority

After creditor notification, the estate’s executor must prioritize the payment of debts. In the case of credit card debt, the executor must evaluate the available assets and allocate funds accordingly. Pennsylvania law outlines a specific order for debts, with certain debts taking precedence over others. The order of priority generally is as follows: reasonable funeral expenses, costs of estate administration, taxes, secured debts and unsecured debts, including credit cards.

Sale of assets and debt settlement

In situations where the estate lacks sufficient liquid assets to cover outstanding debts, the executor may need to sell assets to generate the necessary funds. The proceeds can help settle the debts, including credit card balances. The average credit card balance in Pennsylvania is $5,840.

Depending on how many assets and debts the estate has, there may not be enough to pay all debts, especially lower-priority unsecured debts. A pro rata distribution may occur in which creditors receive a percentage of their claim.

Distribution

Once settlement occurs for all outstanding debts, including credit card debt, the remaining assets go to the heirs of the deceased. Pennsylvania law specifies the order and manner in which distribution should occur.

Understanding these steps is necessary for individuals in the estate administration process to navigate it successfully and fulfill their responsibilities under Pennsylvania law.

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