When a loved one dies, how to handle their debts won't be the first thing on our minds. But at some point it will come up, and it's important to know that support is available. If you're wondering about credit card accounts, here we explain what happens to them, how to deal with any card debt and deceased estate services that offer help.
What happens to credit card debt after death?
When someone dies, their estate is usually responsible for paying off any remaining debts. This includes credit card debt when the account was held in their name, which means the liability would be paid out of the deceased's estate. For joint account credit cards, the other primary cardholder would be liable to pay the remaining outstanding balance.
If there's not enough money to cover the cost of the debt, the creditor is likely to offer the next of kin a payment plan or the opportunity to write off the debt. If the debt exceeds $5,000, it is possible for the executor, next of kin or creditor to bankrupt the estate.
Need help now? Call the National Debt Helpline on 1800 007 007 to speak to a financial counsellor for free.
Secured and unsecured debt
The type of debt someone has can have an impact on how it's managed when they die. Here's a breakdown for the 2 main types of debt:
- Unsecured debt. A credit card is a type of unsecured debt because it's not usually tied to an asset (such as your car or home). This means if a debt is unpaid and remains unpaid, the bank has to go through court to access your estate and any assets that it could then use to cover the cost of your debt (if the court ruled in its favour).
- Secured debt. A mortgage is an example of secured debt that is tied to an asset, such as a house. If someone defaults on their home loan repayments, the lender is within its rights to reclaim possession of the house to recoup the cost of the loan. If the default is due to a death, the lender may offer support and other alternatives, so contact it as soon as you can.
How to deal with credit card debt if a spouse or relative dies
There is a lot to think about when someone dies, and money matters can add to the stress. If you're not sure where to start, below are some simple steps you can take to deal with a deceased family member’s finances.
If you want contact numbers for legal aid representatives, we've included details for each Australian state and territory in the frequently asked questions section.
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. Give the bank relevant details and documents
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.
- If there is no will. Something to prove you’re the next of kin such as a solicitor's letter.
Step 3. Wait for the bank’s assessment
The financial institution will review its accounts for the deceased's estate. This includes any credit card balances, other debts and savings account balances.
If there are outstanding debts, the bank will see if they can be paid off with available assets from other accounts. This includes accounts held by the deceased outside of the bank’s network, such as their superannuation funds.
Step 4. Arrange the release of funds and any debt payments
If there are enough funds to cover the deceased’s credit card debt, the bank will pay the liability first and release any leftover funds to the beneficiaries. If the deceased’s assets are less than the amount owing, the financial institution may contact you to arrange a payment plan.
This usually involves a freeze on the interest rate so that interest charges stop compounding. In some circumstances, the bank may write off the debt. If the debt is more than $5,000, the executor, next of kin or creditor can request to bankrupt the estate.
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.
Example: Dealing with credit card debt after the death of a partner
To help put this in perspective, 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 with MySuper fund. 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.
Remember: You have support and different options available if you need to close accounts or deal with credit card debt after the death of a spouse or relative. If you have specific questions or want guidance for your situation, a good first step is to contact your bank or legal aid to discuss your options.
Find out how life insurance can help your family cover your debts if you pass away
Frequently asked questions
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.
Who else can I contact for help?
What if there isn’t a will?
If the deceased has not left a will, you will need to apply for a letter of administration or probate to prove you’re the next of kin and eligible to administer the deceased’s estate.
What about joint bank accounts?
If you have a bank account in a joint name, ownership of the account will be transferred to your name once the financial institution receives notification about the deceased.
How do I get the probate grant?
Apply for the grant of probate through the Supreme Court. You must have this document if you’re dealing with estates greater than $50,000 in value.Back to top
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