Thinking about what will happen to your assets and debts after your death is not an easy topic but being prepared means that you’ll leave your estate in a much better condition for your loved ones.

Most of us will use some type of credit in our lives. Hopefully, for the most part, we pay it off – but if you pass away suddenly or make the minimum payment on your card each month, this could leave an outstanding balance.

In this post, we look at what happens to credit card debt after death.

Does my debt just get cancelled?

Unfortunately, no. The money that you’ve spent is still owed to that company – otherwise it would be a risky proposition for banks to lend you money at all.

Who is responsible for my debt?

When you die, everything that you own becomes part of your estate. That doesn’t just mean any property or personal effects – it includes your money too. Your chosen executors or an administrator, in case you die without having a Will, will oversee settling any outstanding debts using money from your accounts, or if there isn’t enough, by selling your belongings and using this money. If there still isn’t enough money after your assets have been sold, then this debt is written off, potentially with the need to declare the estate bankrupt– unless there is a second person on the card, your family won’t inherit your credit card debt.

It’s important to note that your estate gets distributed in a specific order – debts are settled before any payments are made to beneficiaries, so gifting money in your Will won’t stop your executors from having to pay your debts.

What if I have debts that no-one knows about?

It can get a little complex if you haven’t told your executors about your debts, but credit cards tend to be held with other bank accounts, so they’re often easier to resolve. In Canada, your executors advertise that you have passed away, and put an open call out for any creditors. This advertisement would include details of how your executor can be contacted by anyone who you are indebted to.

The best thing that you can do is to make sure that all your accounts are clearly listed in a document that you keep with your Will or have a conversation with your loved ones about it – even if that’s not easy.

What happens if I have a joint account or have co-signed for a loan?

Signing up for a joint account, particularly if you’re in a relationship, can feel like a straightforward thing to do – but by co-signing, you’re agreeing to take on the debt if your partner dies or simply stops paying.

If you would struggle to take on your partner’s debt, or vice versa, you should consider avoiding co-signing where you can. Or, if that’s not practical, then make sure that you and your partner have good life insurance policies that could pay out at least some of the money towards the debt in the event of the worst happening.


This post has been prepared for general information purposes. It is not advice. The information presented may not fit your unique situation, please consult one of our trusted business advisors at RHN CPA for further clarification and interpretation of your circumstances.