Credit Card Debt After Death in Ontario: What Creditors Can Collect

Credit card statements keep arriving after someone dies, and the balances can look alarming. Many families wonder whether they now have to pay, and what to say when a card company calls.

This article explains how the deceased's credit card debt is generally handled in Ontario, what happens when the estate does not have enough money, and how joint or co-signed cards fit in. Every estate is different, so use it as a starting point for questions.

Who deals with the credit card balances

When a person dies in Ontario, their property passes to their personal representative, called the estate trustee. The estate trustee holds it for the people entitled to it, after the deceased's debts are paid.

Ontario's probate guidance says the estate trustee is the only person with legal authority to manage or distribute the estate. Relatives who are not the estate trustee have no authority to withdraw money from the deceased's sole accounts. That matters for credit cards: paying the balance is something the estate trustee arranges from estate assets, not something family members do by raiding the deceased's bank account.

• Credit card debt is a debt of the estate, to be dealt with by the estate trustee.
• Family members are not automatically the estate trustee, even if they are closest to the deceased.
• If nobody has been appointed yet, the first step is working out who will apply for the authority to act.

How the estate pays the debts

Unless the will says otherwise, the deceased's debts and funeral and testamentary expenses are paid out of the residuary estate, shared rateably according to the value of each part. In plain words, the debts come out of what is left before gifts of the remainder are paid out.

Two points often surprise people. First, debts such as funeral costs, lawyer's fees, credit card debt and lines of credit cannot be deducted from the estate's value when calculating Estate Administration Tax. Second, life insurance with a named beneficiary is generally not part of the estate and cannot be claimed by the insured's creditors from the time of death. The exception is where the estate itself is named as the beneficiary. Then the proceeds are paid into the estate and that protection does not keep them away from creditors.

If the person died without a will, no distribution may be made until one year after the death, subject to the creditor-notice protection in section 53 of the Trustee Act. That waiting period gives time for debts to surface.

When the estate does not have enough money

If the assets are not enough to pay all debts, the Crown's debts, the personal representative's debts and other creditors' debts are paid proportionately, with no debt ranking ahead of another. A credit card company does not get to jump the line, and it also cannot be paid in full while others get nothing.

There is an exception for secured creditors. The equal-sharing rule does not affect any lien the debtor gave over their property during their lifetime, so secured creditors keep their security. A credit card with no security behind it would not normally fall into that group, but a lawyer can confirm how a particular debt is classed.

Where the estate cannot pay everything, the estate trustee should be careful about who is paid first. In a bankruptcy of a deceased person, reasonable funeral and testamentary expenses incurred by the legal representative are paid first, subject to the rights of secured creditors. An estate trustee facing a shortfall should get advice before paying anyone.

Joint, co-signed and secondary cards

A card in the deceased's name alone is an estate debt. A card you signed for yourself is different. For spouses, Ontario's Family Law Act does not make a spouse liable for the other's debts, except for necessities of life in certain situations and debts the survivor signed for themselves, such as joint debts or guarantees.

So if you were a joint account holder or guaranteed the card, the company's claim against you may continue because of your own agreement, not because of the death. If you were only an authorized user, your position can depend on the card agreement. The terms vary between issuers, so keep the agreement and ask a lawyer to read it with you before paying or admitting anything.

What to do with statements and collectors

Keep calm and keep records. Do not pay the balance from your own pocket just to make the calls stop, and do not agree to take over the debt before you know whether you are legally responsible.

• Gather every statement, letter and voicemail, and note the dates of calls.
• Tell the card company that the person has died and give the estate trustee's contact details once there is one.
• Do not withdraw money from the deceased's sole accounts unless you are the estate trustee with authority.
• Do not sign anything that makes you personally responsible without legal advice.
• Ask the estate trustee about giving notice to creditors before distributing the estate.

That last step protects the estate trustee. If the estate trustee gives notice to creditors of the kind the court would have directed, they may distribute once the time in the notice has expired, taking account of the claims they know about. They are then not liable to a creditor whose claim they had no notice of at the time of distribution. The protection covers only unknown claims, and the estate trustee must still have regard to claims they have notice of.

Frequently asked questions