What Happens to Credit Card Debt When You Die in Canada?

Losing a loved one is hard enough without having to be concerned about their unpaid credit card debt. When a credit card company or collection agency calls the family, a key question that may arise is who is responsible for the debt? 

Generally, Canadian families don’t automatically inherit the credit card debt of a relative. Instead, the debt is normally dealt with through the deceased person’s estate, although important exceptions can apply.    

Will Credit Card Debt Disappear After Death?   

Not necessarily. The assets and debts of a person who has passed away are part of their estate. The executor of an estate is typically the individual who is named in the will to manage the estate. Provincial or territorial laws govern who is allowed to administer the estate if there is no will or executor.

The executor’s responsibilities include determining the assets of the deceased, locating unpaid debts (and checking whether balance protection was active, as understanding how credit card insurance works in Canada can sometimes cover outstanding balances), communicating with creditors, and settling the estate before distributing remaining assets to beneficiaries. 

If the credit card was just in the deceased’s name, the balance is generally a debt of the estate, not automatically a debt of their children, spouse or other relatives.

However, the exact process for handling an estate depends on the province or territory where the deceased lived.

Who Is Responsible for Credit Card Debt After Death?

The answer depends entirely on the way the credit card account was established. 

Credit card in the deceased person’s name

In the event that the deceased was the sole borrower, the credit card firm can claim against the estate. The executor typically handles the creditor and disburses the estate’s funds to pay legitimate creditors where required. Normally, the family members are not personally liable because they are related to the deceased.

Co-Borrowers or joint borrowers

This is an important exception to the rule. A co-borrower or joint borrower has signed the credit agreement and is responsible for the balance. When one borrower dies, the other borrower may still be liable for the debt.

Therefore, when a husband and wife are co-borrowers on a credit card, the surviving spouse could still be on the hook for the remaining debt balance. In these situations, exploring low-interest credit cards for debt consolidation can help manage the financial transition. 

Authorized users

Being an authorized user is different from being a joint borrower. An authorized user can be added to another person’s account and make purchases with the card, but the account belongs to the primary cardholder. The Financial Consumer Agency of Canada states that an additional cardholder or authorized user is not responsible for repaying the credit card balance.

This is important because just being named on a card doesn’t mean that you are legally liable for the debt.

Co-signers and guarantors

Someone who has cosigned a credit card agreement may also be liable for the debt. If you are unsure whether you were an authorized user, joint borrower or guarantor, review the credit agreement and contact the card issuer for clarification.

What Happens If the Estate Cannot Pay the Credit Card Debt?

In some cases, an estate may not have sufficient funds or assets to pay all of the deceased’s debts. In that situation, creditors might not receive everything  they are owed. Treatment and priority of various debts may vary, depending on the provisions of the provincial or territorial law and the estate’s circumstances.

Credit card debt is typically unsecured debt, which is debt that is not secured by a particular asset, like a home or vehicle. Unsecured balances highlight the pitfalls of credit card debt, as creditors must compete for estate funds without collateral. 

The important point for families is this: relatives do not normally have to use their own money to pay a deceased person’s individual credit card debt simply because they are family members. If the estate has insufficient assets, professional advice may be appropriate before assets are distributed.

What Should the Executor Do?

When dealing with someone’s estate, some practical steps can include:

• Notify the credit card company of the death.
• Inquire about the necessary paperwork, like a death certificate.
• Identify all credit card accounts and outstanding balances, a key step when managing credit card debt in Canada on behalf of an estate. 
• Stop using the deceased person’s cards.
• Cancel unnecessary automatic payments and subscriptions.
• Keep records of communications with creditors.
• Identify the estate’s assets and other liabilities.
• If the estate is complex or if it seems it cannot pay its debts, seek legal or professional advice.

The Canada Revenue Agency also states that a legal representative  is responsible for managing the tax affairs of the deceased and must obtain a Clearance Certificate before distributing assets to avoid personal liability for those debts. 

What if a Collection Agency Calls the Family?

Receiving a collection call after someone dies can be stressful, but don’t panic. Do not assume that you personally are responsible for the debt if you were not the joint borrower, co-borrower or guarantor.

Let the caller know that you are dealing with the estate and request information from the creditor or collection agency about the account and the grounds for the claim. When there is doubt as to the legal liability, it is better to seek expert advice rather than make personal payments.

The Bottom Line

So, what happens to credit card debt when someone dies in Canada? Usually, the debt is handled through the deceased person’s estate, rather than automatically being passed to their family.

The largest exceptions are those who were legally associated with the debt, such as joint borrowers, co-borrowers or guarantors. Authorized users, however, are not usually liable for the account balance. Estate law is a provincial and territorial matter, so the specifics and processes may differ and vary across Canada.

If you’re dealing with an estate right now, don’t assume you have to pay a relative’s credit card debt from your own pocket. First determine who legally owes the debt, what assets are in the estate, and which provincial or territorial rules apply. For more information, consult the Government of Canada’s resources on estates and wills and representing someone who died.