

Ask HN: Dying with debt? - coltr

What happens when all of the Americans (etc) with tons of debt start passing away? Will the new customers make up for all the losses to the credit card companies?
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greenyoda
Let's say the interest rate on your credit card is around 20% per year.
Suppose you max out your credit line and then make the minimum monthly payment
for several years (i.e., you're paying mostly interest and hardly any
principal). After around five years of 20% interest, the credit card company
will have gotten back 100% of what it lent you, as interest payments. After
that, they're making pure profit. So unless you die very soon after racking up
your debt, they'll have no real losses (although there may be losses deducted
for tax purposes; I'm not sure how that works).

People have been dying for even longer than credit cards have been around, so
we should expect that this ubiquitous phenomenon has been accounted for in the
credit industry's business model.

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blakdawg
Not sure why this is relevant to HN.

When someone dies, their debts don't disappear - the debts are paid from the
assets owned by the decedent before heirs/beneficiaries are allowed to
inherit.

Credit card balances can be negotiated down after death - but that happens
pretty frequently with living people, too, through bankruptcy or otherwise.

Lenders don't expect that every debt will be repaid in full - it's part of the
business model.

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DanBC
But if a person dies in debt and there's nothing in the estate to pay that
debt it does die with the person. Unless they deliberately drove up debt just
before dying.

At least, this is how it is in the UK.

I'm less worried about people dying with debt than I am with young people
having to pay huge debts off, and having to save for old age, at the same
time.

~~~
lgieron
In Poland, you can just opt out of the inheritance. Not sure how it works in
other places, but that seems like a sensible law.

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cjbprime
You're worried about credit card companies going bankrupt? That.. does not
seem like a very wise worry to have.

~~~
iambateman
Those poor credit card companies will need help. ;) jk

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VLM
There is a moderately scummy debt collection biz complete with "I'm sure your
great aunt would have wanted that debt paid off while she was still alive"
complete with hitting up the entire family with the hope of multiple times
repayment. Often the claimed debt doesn't even exist, or you get five
different scammers all who looked up the same prop tax / mortgage records. So
yeah its a thing. Its a simplification, but unless you're married to someone
who dies, or you were dumb enough to cosign a loan of someone who dies (often,
but not always, there are life insurance policies on that...), you're off the
hook.

I'm old enough to have seen enough ancestors die (more than just immediate
family of course) and there's a large business oriented around making sure
middle class people never inherit anything. Its hardly a new problem. All of
someone's net worth is supposed to go to the medical industrial complex, or a
couple other places. You can safely assume that whatever boomer generation net
worth is, approximately zero is going to gen-x other than the highest net
worth of the 1%. Same thing happened with the WWII generation and presumably
every generation before them.

