So what happens to your debts when you die?


If you have debt, you may wonder what happens to it when you die. Well, it depends on if there is any money in your estate to pay the creditors and it also may depend on the creditor that the debt is owed to.

Credit card debt

If there is no money in your estate to pay outstanding credit card amounts then any debt on credit cards solely in your name will typically be written off as a loss by the lending company should you die. They’re considered unsecured creditors and would be at the back of the line of debt-holders trying to collect from your estate.

If, on the other hand, your credit cards are joint accounts with your partner or spouse, he or she will be responsible for continuing to make any payments owed.

If you (or an executor) make a payment on a debt of a loved one, a case could be made that you have accepted responsibility for the loved one’s debt after their death.

Mortgage and car loan debt

Mortgages and car loans, however, are considered secured loans and the lenders will come after your estate to ensure they’re paid in full. Odds are these larger purchases were co-signed by you and your spouse so the surviving person will be required to continue to make the payments as before.

If your partner or spouse is unable to maintain payments without you or if you have a substantial amount of debt that your spouse and family may end up being held accountable for, you should have a plan in place to pay for that. Your best bet is an insurance policy.

Uncollectible debts

If there is no money in the estate to pay the debt and if the debt is only in the name of the deceased person, the credit grantor will be left with no option but to write off the debt as uncollectible.

A debt does not automatically transfer to a surviving spouse. You are only responsible to pay for debts that you have contractually created. So, there needs to be contractual evidence that both spouses signed for the debt in the first instance.

If you are contacted by a creditor, be prepared to supply the creditor with documents proving there is no estate and that there is no ability to pay the debt.

No one can leave a debt to you that you have not contractually created. Do not accept a debt for a deceased person by signing documentation from a creditor after death. Do not make debt repayments personally after death on behalf of someone else.

A Will

Typically a will has control over the financial affairs of a deceased person. However, a will can only distribute assets, not debts. Before any money can be distributed to heirs, all the proven debts must be paid. If there are not enough cash assets to retire the debt load, some things may be sold to pay the proven debts. After the debts are paid, the remaining assets are distributed amongst the beneficiaries.

If you are unsure, it is always recommended that you speak to a professional about your specific situation before taking any action.

Lynn Williams
Professional Financial Advisor
President & CEO of The Lifestyle Protector
P: +1604 833 0348
1322 – 1111 W Georgia St
Vancouver, BC, Canada

“We try to ensure the information and advice is correct at time of publising. The information is provided as a public service and does not constitute solicitation or provision of financial advice. The information is intended for residents of British Columbia, Alberta and Saskatchewan.  E & O E. “


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