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If you have parents or in-laws that you suspect to be deeply in debt you may be concerned that you’ll have to take on those debts when they pass away. It’s very common for children to have concerns about the state of their parent’s finances, particularly their personal loan and credit card debt. So what happens to credit card debt when you die in Canada?

Below is all the information you’ll need to deal with any questions you have about the debts of a deceased parent or family member.

Who Has to Pay Off the Credit Card Debt Of A Deceased Person?

If your family member passes away, you may be concerned that you’ll inherit their outstanding credit card debt. But that’s not usually the case. 

Family members would only be required to repay the debt if their name is also on the credit card contract. Otherwise, you won’t have to worry about paying back the credit card debt that the deceased accrued up until the time of their passing. 

What Happens To Credit Card Debt When You Die In Canada?

If you’re not a co-borrower on the credit card and the primary cardholder dies, what happens to the outstanding credit card debt? Does it just disappear?

No, the debt will be covered by the cardholder’s estate. That is if the estate is adequate enough to deal with the entire credit card debt. When a credit cardholder dies, all the assets in their name become part of their estate, which includes their entire net worth. Any debts still outstanding – including credit card debt – will be repaid using the assets from the estate.

A credit card that is held exclusively in a person’s name is the sole responsibility of that person. As such, only they are liable to repay the debt. In the event of their death, their estate will be accessed to cover the debt. 

What Happens If The Deceased Has No Money In Their Estate?

A debt is considered uncollectable in the instance when there isn’t any money in the estate to pay off the debt and the debt was solely in the name of the deceased person.

In cases like these, it is best to have your documentation organized. This way, if you are contacted by a creditor, you will be able to supply the documents necessary to prove that there is no money in the estate and that paying off the debt is not possible. However, it is generally suggested that you speak to a professional before taking these actions. 

Are You Responsible For Joint Credit Card Debt After Death In Canada?

If you signed your name on the credit card contract as a co-signer or co-borrower along with the deceased, then you are legally responsible for paying the credit card debt left behind if the other individual dies. 

The joint credit card is the responsibility of both individuals on the contract. If one of the co-borrowers passes away, the other person left behind will be liable for continuing to make debt payments. 

What If You Can’t Pay Off A Joint Credit Card Debt?

If your co-borrower has suddenly passed and you’re struggling to pay off your joint credit card debts, consider the following:

  • Take out a debt consolidation loan – A debt consolidation loan is basically a personal loan that allows you to pay off your debt over a period of time. This can be a good option as the terms are long and interest rates are low, especially compared to a credit card. However, be sure to check your credit score to ensure you qualify for the best rates.
  • Speak to a credit counsellor – You can also speak to a credit counsellor who can help you evaluate your financial situation and provide you with a debt relief solution. This may include a simple solution like a budget to a more extreme option like bankruptcy. 

Are You Responsible For Credit Card Debt After Death In Canada If You’re An Authorized User?

An authorized user is much different than a co-borrower, especially when it comes to liability for repaying the debt. Most shared credit cards in Canada involve a primary cardholder and authorized users, rather than joint cards with two co-borrowers. 

As an authorized user, you have the privilege of using the credit card without having the responsibility of repaying the debt owed if the cardholder passes away. Authorized users are only given permission by the primary account holder to use the card. 

In this case, only primary cardholders are responsible for paying off the outstanding balance, not authorized users.

How Does Balance Protection Insurance Affect Credit Card Debt After Death In Canada?

If a person dies and has balance protection insurance on their credit card, this policy will cover the remaining debt. It’s an optional type of insurance meant to help cardholders cover their credit card payments in case they’re unable to keep up due to things like job loss, disability, and even death. 

Should You Get Balance Protection Insurance Or Life Insurance?

  • Balance protection insurance. This may be more worthwhile if there is a co-borrower tied to the contract. That way, the co-borrower will not have to carry the financial burden of repaying the outstanding debt in the event that the other co-borrower passes away.
  • A life insurance policy. On the other hand, this can be a better option because the benefit paid out can be used to pay off all sorts of debt, including credit card debt. Plus, life insurance can be cheaper than a credit card’s balance protection insurance.

Will A Will Protect My Hiers From My Debts?

As we all know, a Will dictates the financial outcomes of the deceased individual. However, it’s important to note that a Will distributes assets and not debts. Nevertheless, these assets can only be distributed once the proven debts have been paid. 

Ideally, there are enough cash assets to pay off the debts. But if this is not the case, other assets may be sold to pay off the debt. Once this has been done, the remaining assets are distributed among the heirs

Be very cautious if you are contacted by a creditor to pay a debt. If you do not believe you are responsible for this debt, make sure to ask for a copy of your signature on the contract from the creditor. Making a payment on a debt could be interpreted as you giving consent and that you are accepting responsibility for the debt. This is why it is best to always speak to a professional before taking such actions.

Bottom Line On What Happens To Credit Card Debt When You Die In Canada

Always remember: you are responsible for paying off debts in the sole circumstance where signed legal documentation can be produced. Unless there has been consent, nobody can leave their debts to you. Debt is an individual burden unless someone has agreed to take on someone else’s debt. And finally, stay on top of documentation, know your rights, and if necessary, contact a professional.

Credit Card Debt After Death In Canada FAQs

Will my beneficiaries inherit my debt?

No, your loved ones won’t inherit your debt when you die. Any debts remaining after your death are paid out from the assets in your estate.

Will credit card providers come after my children to pay for my debt?

Some credit card companies may try and get your children to pay for your credit card debt. However, they are not obligated to pay your debts, unless it was a joint debt. Your children should speak with a lawyer when you die so they understand their rights and potential obligations.  However, if you had credit card balance protector insurance, your policy may cover the outstanding debt when you die. 

Can creditors use my life insurance policy to cover my debts when I die?

It’s possible for your creditor to use your life insurance policy to cover your outstanding debt if you don’t name a beneficiary in your policy. Without a beneficiary named, the payout of the policy would be used to pay off your debts instead of going to your loved ones.  That’s why it’s important to ensure that you name a beneficiary on your life insurance policy so the benefit is paid out according to your wishes. 

Are debts forgiven after death?

Debts in your own name are your responsibility, no one else’s. This includes credit card debt, mortgages, personal loans, student loans, and lines of credit. Unless someone else co-signed on the credit card or loan, there is no one else liable for these debts.  If your estate is valuable enough to cover your debts when you die, then your debt will be settled. But if your estate does not have enough assets to pay off your debts when you die, your debts will be forgiven. 
Lisa Rennie avatar on Loans Canada
Lisa Rennie

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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