What Happens to Debt When You Die in Canada Frequently Asked Questions (FAQ)

By Garrett Johnson

A common question we get asked is, “What happens to debt when you die?” Talking about debt can already be uncomfortable, let alone facing those conversations when you’ve lost a loved one and you’re filled with sadness and grief. At times like that, we understand how debt is probably the last thing you want to think about, so we are here to help. In this FAQ article, we will answer some of the questions we are asked most frequently so you can get the information you need for any questions you may be asking.

Does My Family Have to Pay My Debt if I Die?

In Canada, typically your debts are not inherited or passed on to any family member, meaning your family does not have to pay your debt if you die. Your debts are first settled by your estate, which will use assets to pay off what you owe. But what happens to your debt when you die if you have no estate? In cases where there are no assets to sell or not enough money to cover the balances owing, creditors have little choice but to write off the debt as uncollectible. However, if a family member or friend is a joint debtor, co-signer, or guarantor they will still be held responsible. With joint debt, responsibility isn’t divided 50/50—each person is equally responsible for the full amount.

What Happens to Credit Card Debt When You Die?

Another common question we get is: What happens to credit card debt when you die? Credit card debt is unsecured debt, so the same answer applies to payday loans, unsecured debt consolidation loans, and many other personal loans that were granted without collateral. If you are the only one who signed the agreement for the credit card, no one else is responsible for making the payments, as they are not part of the credit card contract. That said, if the credit card is joint, the joint cardholder would be responsible to continue making payments. If you have assets that could be sold, then those would need to be used to pay off what you owe.

If you aren’t sure as to the terms of your credit card agreement, you can check your paper copy if you have one. If you don’t, contact your credit card company for the information you need. Your agreement may not indicate if others are responsible for the balance owing, like if you added someone later, but they will be equally responsible. Make sure not to use the credit card of someone who has passed away and delete it from any online payment profiles (e.g. streaming services, monthly subscriptions, or shopping accounts) so that it doesn’t get used in error. Instead, keep the account number and if you’re the executor, the online access, safe until you have a clear idea of the balance owing and payment history, which will also show you if your loved one paid any type of cardholder life insurance.

If you’re wondering what happens to credit card rewards points after someone dies, the answer depends on the card issuer’s policies. Some companies allow points to be transferred to a beneficiary, while others may cancel them upon the cardholder’s death. If there are points that can be transferred, consider how you can make credit card points work for you.

What Happens to my Mortgage When I Die?

There are some differences when we look at what happens to your mortgage when you die. If you pass away, the remaining balance on your mortgage stays attached to the asset. Just like unsecured debt, if there is someone joint on your secured debt, the mortgage payments would be their responsibility. If you are the living survivor of a joint mortgage and need help, debt relief options are available.

If you have inherited a property with a mortgage, talk to the lender about options if there are not enough savings in the estate to pay out the mortgage because you will need to qualify for a new mortgage in your name. Some lenders may allow you to assume the mortgage under the same terms, or renegotiate it to make payments more manageable. It’s also worth inquiring about life insurance policies or payment protection plans that may have been set up to cover the mortgage in the event of the borrower’s death. These options can provide financial relief and help you keep a home without financial stress.

Does Debt Get Passed Down?

We are often asked if debt gets passed down. The short answer is no, debt doesn’t transfer to children or other family members such as nieces, nephews, siblings, or grandchildren. There are, however, some exceptions, such as if you co-signed on a loan or are part of a joint debt agreement, such as a credit card, overdraft on a bank account, or mortgage. That being said, it’s important to talk to the executor, if there is one, and legal experts when it comes to how an estate will handle debts, creditors, and assets.

One area that requires special attention is debt owed to the Canada Revenue Agency (CRA). The estate is responsible for filing tax returns and paying any outstanding amounts, as well as completing the final declaration that CRA requires to close someone’s tax file. Executors or family members should also be aware that the CRA can place a claim on the estate’s assets to recover unpaid taxes, which could impact the distribution of inheritances. Consulting a tax professional or estate lawyer can help avoid unexpected liabilities.

How to Protect Your Loved Ones from Financial Burdens After Death

When it comes to understanding what happens to debt after death in Canada, the key takeaway is that debt is typically not inherited by family members. Instead, it is settled by the estate using available assets. However, joint debts—such as credit cards, mortgages, lines of credit, personal loans, or overdrafts—can create shared responsibilities, and taxes owed to the CRA must also be addressed. By having open conversations about finances, documenting important information, and seeking professional guidance, you can protect your loved ones from unnecessary financial burdens and ensure that wishes are respected.

If you’re unsure where to start, we’re here to help. We offer webinars and educational resources to not only help guide you through conversations about debt and estate planning with your family but on a number of other, helpful money management topics. And if you or someone you know is feeling overwhelmed by debt or financial challenges, remember that options do exist. Our team is here to help you create a plan, understand your choices, and take steps toward financial peace of mind.

How to Protect Your Loved Ones from Financial Burdens After Death

Now that we’ve gone over some FAQs and given you insight into frequently asked questions, let’s take a moment to talk about how you can protect your loved ones from financial burdens after your own passing. While it may not be easy, having open and honest conversations about finances is one of the most important steps you can take. Here are some practical ways to start those discussions:

Choose the Right Time and Place: Find a calm, private moment to talk, free from distractions. This could mean arranging a family meeting or reviewing important documents with those you trust. Setting aside dedicated time ensures that everyone is mentally prepared and focused. By choosing a moment when emotions are calm, you create a safe space for open and honest dialogue, avoiding misunderstandings and unnecessary tension.

Be Transparent About Your Situation: Share details about your debts, assets, and any plans you’ve made (e.g., wills, insurance policies, or who you have named to be executor of your estate).

Ask About Their Plans: Encourage your loved ones to share their own financial situation and wishes when they feel comfortable doing so. This ensures everyone is on the same page and helps uncover any potential gaps, such as outdated wills or unaddressed debts. Making sure everything is accounted for can prevent complications and ensure nothing is lost or overlooked.

Document Everything: Keep a physical record of important financial information, such as account numbers, passwords, contact details for advisors or creditors, location of a safety deposit box, and bank and investment statements. You can find booklets and lists online you can print out that will help you organize this information and keep it up to date. Share with trusted family members and/or your designated executor where you’re keeping your records so that they can find them when the time comes.

Seek Professional Help: If the conversation feels overwhelming, consider involving a financial advisor, counsellor or therapist, and/or a lawyer or accountant who specializes in estate planning to guide the discussion. These professionals can provide clarity and mediate difficult conversations. If you find that you need help resolving your debts, one of our credit counsellors would be happy to help you with that. Additionally, if you suspect that a loved one is being taken advantage of financially, there are resources available to help. Organizations like the Canadian Centre for Elder Law can offer support and intervention to protect vulnerable individuals from exploitation, or if you feel threatened, don’t hesitate to reach out to your local police.

Worried about debt?

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The sooner you start dealing with your debt, the sooner you see an improvement in your credit report If you need some help getting started with a plan, or if you’re not sure if your budget is realistic, contact a non-profit credit counsellor for free, confidential help. Typically, the earlier you contact us, the more options you’ll have.

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