What happens to credit card debt when you die?
In Australia, credit card debt becomes a part of a person’s deceased estate. An authorised representative of the estate can freeze the account and pay off the unpaid balance.
Key takeaways
- When a loved one dies, their credit card debt does not disappear. The deceased estate is liable to cover the costs.
- You can contact the deceased's bank to freeze the credit card account and authorise a repayment of the unpaid card balance. But only if you are an Authorised Estate Representative.
- If you share a joint account with the deceased, then you will gain sole control of the account, and you will be responsible for paying off the debt.
How to deal with a deceased person's card debt if you are an Authorised Estate Representative
The Authorised Estate Representative is allowed to handle the deceased estate's dealings, including unpaid credit card debts. Often this person is named in the deceased's will.
If you haven't been named in the will and you are the next of kin you may have to apply to the court for a letter of administration (more on this in the next section).
You can also engage a solicitor to act on the estate's behalf when dealing with unpaid debts or other parts of the estate.
Need help now? Call the National Debt Helpline on 1800 007 007 to speak to a financial counsellor for free.
Step 1. Let the bank or lender know
Financial institutions usually have deceased estate and bereavement specialists that will help you get someone's accounts in order. Below, we've included contact details for the Big Four banks.
| Bank | Bereavement / Deceased Estate number |
|---|---|
| ANZ | 1800 237 170 |
| Westpac | 1300 130 240 |
| Commonwealth Bank | 1800 686 153 |
| NAB | 1300 911 451 |
Step 2. Confirm your authority to represent the estate
You will need to prove that you are the Authorised Estate Representative. The bank will ask for documents to prove this or a letter from the estate solicitor.
Step 3. Give the bank relevant documents and details
The bank or lender will ask you for a death certificate or other details of the deceased. Usually, you will need to fill in a “deceased estate notification form”. The information you'll need to provide for this form includes:
- Details about you. Your name, relationship to the deceased, address and contact information.
- Details about the deceased. Their name, address, date and place of birth.
- If there is a will. A copy of the will and the death certificate.
Step 4. Request release of funds and close accounts
The financial institution will review its accounts for the deceased's estate. This includes any credit card balances, other debts and savings account balances.
The bank should be able to freeze the credit card account. The bank can provide you a list of regular payments taken from the deceased's bank account, debit card or credit card.
If there are funds available in the accounts, you can request the bank pays off the card balance using these funds.
What do you know about funeral insurance?
Credit card debt can be paid from a mix of sources that are linked to the deceased’s estate, not just savings. Most superannuation accounts, for example, offer some form of life insurance that could cover the cost of debts that need to be paid when the account holder dies.
What if my loved one died without a will?
If you're the next of kin for the deceased but there's no will, then no one is named the Authorised Estate Representative. In this case you could apply to your state supreme court for a Letter of Administration.
This process varies by state but you'll need the original death certificate. If approved, the court will grant you the right to administer the estate and handle their debts and other affairs.
What legal aid numbers can I call for help?
Free, independent legal advice is available through government-run and not-for-profit legal associations. Consider these organisations if you're looking for legal help to deal with a deceased estate. Your bank may also be able to assist.
| State | Legal help |
|---|---|
| NSW |
|
| Victoria |
|
| South Australia | |
| Queensland |
|
| Western Australia |
|
| Tasmania |
|
| Northern Territory |
|
Who else can I contact for help?
- The Australian Centre for Grief and Bereavement
- The Births, Deaths and Marriages Registry
- Australian Funeral Directors Association
- Beyond Blue
- Lifeline
What if I have a joint credit card with a loved one who died?
If you have a joint credit card account then you will retain total control over the account. And you'll have to pay off the balance as normal.
You can still notify the bank if you wish to remove your late partner's name from the account.
Example: Dealing with credit card debt after the death of a partner
Let's take a look at a scenario for a couple living in Sydney, who we'll call Alex and Jamie. In this scenario, Alex had a $10,000 credit card debt when they died, and a will that left everything to Jamie. Their home was in both their names, and when Alex died, ownership of the property automatically passed to Jamie. This meant the family home was excluded from Alex's will and couldn't be used for any claims by creditors. (Note that the bank could not claim an asset like the family home to cover an unsecured debt anyway).
Alex also had a superannuation balance of about $800,000 in a MySuper account. This fund also included insurance with a death benefit. Alex's solicitor handled the settling of their estate and the $10,000 credit card debt was paid to the bank from the superannuation death benefit. The remaining balance of assets went to Jamie.
Find out how life insurance can help your family cover your debts if you pass away
What happens if the deceased estate doesn't have enough money to pay off the credit card?
Any debts must be paid from the estate before any beneficiaries receive any benefits. This means children or partners may not inherit any money if the debts are greater than the assets.
If the estate doesn't have enough money, after taking into account all the deceased person's assets including superannuation and any life insurance payouts, the estate is insolvent.
Entering bankruptcy
The estate could apply for bankruptcy. If the remaining credit card debt (or other debts) is $10,000 or more, it is possible for the creditors to bankrupt the estate by applying to the court.
It may also be possible to negotiate the unpaid card debt with the bank, or even get the debt waived. In these circumstances it's a really good idea to seek legal advice.
Can I inherit a loved one's credit card debt?
If the credit card debt is from a joint credit card account you shared with the deceased, you're liable to pay the debt. It's your card.
But if you're not a joint cardholder, and there are not enough assets in the estate to pay off the credit card debt, the debt does not pass to you. But you also won't inherit any assets.
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Please consider this scenario. A couple with one of the partners owning a home in their name and also has credit card debt. The home owner has granted life interest for the remaining spouse through their Will. How would the financial institution deal with the deceased person’s unsecured credit card debt in this instance if there wasn’t any other assets to repay the loan?
Hi Bob,
Thanks for your question.
For any further information relating to specific account enquiries and issues, please speak to your bank, lawyer or to the relevant financial planner.
All the best,
Shirley
I have unsecured credit cards in my name only. If I die will my spouse have to pay them off?
Hi Gary.
Thanks for your question. In the event of your death, your spouse will not be responsible for paying off your credit card debt.
Thanks.
What’s happens if my mum has nothing in assets, will I her daughter have to pay her credit card debt? She’s been diagnosed with terminal cancer! I’m a paraplegic and have no money!
Thanks.
Margie.
Hi Margie,
Thanks for your question.
Credit cards are an unsecured form of credit, the card issuer should not chase a family member over a loved one’s credit card debt. If your mother will not be able to make a payment on her credit card account for more than three times, her credit card issuer may pass the debt to a collection agency. You may consider a credit card payment plan. This is a formal legal process where you ask your lender to vary the terms of the contract. It could involve a lower interest rate, lower fees and penalties, a fixed payment schedule, or some other option. You may speak to the credit card provider regarding your payment plan.
I hope this helps.
Cheers,
Jacob
What happens to an unsecured personal loan if the person dies?
Hi Ann. If the deceased’s estate is sold and their are not enough funds to pay unsecured creditors, the debt can go unpaid. The deceased’s family can not be held liable for these debts. Thanks. Jacob.