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What happens to credit card debt after someone dies?

By Kristen Frisa and Kira Vermond

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When someone dies, relatives are often left to settle the financial affairs of the deceased. Sometimes that's a straightforward process, and sometimes it's not. Add in the emotional stress, and it can seem especially overwhelming.

But, like with any difficult situation, you simply need to break the problem down into manageable pieces to determine how to tackle it.


Here are some questions to ask yourself when handing the finances of a loved one, family member or friend who has died:

Are you jointly liable for the debt?
If you co-signed on a credit card with the deceased, you are responsible for any debt they incurred. This is true even if you were not aware that the bills were stacking up.

"The only reprieve is that you could request (as you are jointly on the card application), to maintain the minimum monthly payments or occasional lump sum payments to clear the card off in full over time, as the deceased would have/should have done," Douglas Gray, a lawyer in Vancouver, B.C., and author of The Canadian Guide to Will and Estate Planning, said in an emailed response to questions.

If you are listed on the account, you may be worried about your ability to make the payments on your own. Some credit cards offer balance insurance that covers spouses, and this might help, depending on your coverage.

Desjardins Financial Group, for instance, offers balance insurance that covers your spouse at no extra charge, even if your spouse isn't a joint cardholder.

Depending on the age of the persons covered, credit card balance insurance can cover up to $25,000.

"All of our insurances have spousal coverage," says a representative at TD Balance Protection. "We cover the balance at the date of death for credit card holder and spouse."

Other forms of life insurance could help cover debts, and this might be an option if you're considering joint ownership on larger loans.

If you don't hold any joint accounts with the deceased, you're in a better position. No one will be coming after you for a parent's debt, for example, if you aren't listed on the account.

"Whomever has obligated themselves in a credit card application is the one who has the debt," Gray said. "Nobody else."

You will want to be absolutely sure that you are not a co-signer on any debt. Check your credit report to be certain.

Will the debt be paid by the estate?
To put it simply, when someone dies and has a will, a person is designated the will's executer and must use the estate's assets to pay any outstanding debts. Whatever money is left over goes to the beneficiaries. 

If the person dies without a will, a public trustee of the province steps in and takes care of paying any outstanding debts.

"The first priority is to pay off any debts with the assets," says Gray. "Creditors come before beneficiaries."

Determining exactly what is considered an estate asset can be simple - if it's, say, money in the bank - or complicated - such as some assets held jointly between a parent and an adult child.

The general rule when it comes to a spouse is that assets held in joint names with right of survivorship are not considered part of the estate. (If your husband dies, you will not have to sell the house to pay off a credit card that's in his name alone. If it was a joint card, you are still obligated to pay off the balance.)

Because determining assets can be complicated, it's best to contact an attorney.

What should you do if collectors call?
After a death, creditors sometimes will call or send threatening letters demanding payment from family members. If you receive one of these collections calls, do not pay until you've determined that you are indeed responsible for the debt.

Although you would have to pay if you owned the card jointly, as an authorized user (with the deceased as the primary cardholder), you would owe nothing. Ask the collections agent to send you a copy of the original contract with your signature to prove you are indeed jointly responsible for the debt.

In the end, if the estate does not have sufficient funds, some debts never get repaid and the credit card companies must write off those balances as uncollectible.

See related: Divvying up debt during divorce, 7 myths about joint credit cards

Updated: June 8, 2017