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What happens to credit card debt when you die?

In Australia, credit card debt becomes a part of a person’s deceased estate. Here’s what that means and 4 steps to deal with it.

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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. You can use this guide to find out what happens to credit card debt after death, how to deal with it and deceased estate services that offer help.

What happens to credit card debt after death?

When you die, your estate is usually responsible for paying off any remaining debts you have. If the credit card is in a joint account, the other primary cardholder will be liable to pay the remaining outstanding balance. If the credit card debt is only in the name of the deceased cardholder, the liability will be paid out of the deceased's estate.

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 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 management of debts for a deceased estate varies based on which of the following debt categories it falls into:

  • 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 the bank has to go through court to access your estate and assets, which it'll use to cover the cost of your debt.
  • Secured debt. A mortgage is an example of secured debt that is tied to an asset, such as a house. If you default on your home loan repayments, the lender is within their rights to reclaim possession of the house to recoup the cost of the loan.

How to deal with credit card debt if a spouse or relative passes away

Below are some simple steps you can take to deal with a deceased family member’s finances. We’ve also listed contact numbers for legal aid representatives in each state in the frequently asked questions section of this article. Refer to these contacts if you want to seek free, independent legal advice.

Step 1. Notify your bank

Financial institutions have deceased estate and bereavement specialists you can call to help you work through a difficult process. Here are the contact details you'll need to contact the deceased estate specialists at the Big Four banks.

Bank Bereavement / Deceased Estate Number
ANZ1800 237 170
Westpac1300 130 240
Commonwealth Bank1800 686 153
NAB1300 911 451

Step 2. Give the required documents to your bank

You may be asked to provide details of the deceased, as well as your personal information so that the bank or financial institution can provide appropriate assistance based on your individual circumstances. The financial institution may also want to see a certified copy of the death certificate and will. Document requirements vary depending on whether or not you can provide it.

Your financial institution may ask you to complete a “deceased estate notification form”. The information you'll need to provide for this form include:

  • About you. Name, relationship to the deceased, address and contact information.
  • About the deceased. 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 letter of administration.

A bank branch manager may be able to assist with on the spot certification of original documents if you take them to a branch.

Step 3. Bank’s assessment

Here, the financial institution will review the deceased’s estate. They will look at current debts and assets, including outstanding credit card debts and savings account balances. If there are outstanding debts, the bank will make an attempt to reconcile the debt 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. Release of funds

If there are sufficient 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 range of sources linked to the deceased’s estate. Most superannuation accounts, for example, offer some form of life insurance that offer a benefit that covers debts leftover when the account holder passes away.

How to deal with credit card debt after the death of a spouse

George and May lived in Sydney. George suddenly passed away. He left everything to May in his will, including a $10,000 credit card debt. The home was in both their names, and when he died, ownership of the property automatically passed to May. This meant the family home was excluded from George’s will and exempt from any claim by creditors (even though the bank can not claim an asset like the family home to cover an unsecured debt).

George also had a superannuation fund balance of about $800,000. He was a member of MySuper fund, which included insurance with a death benefit. George’s solicitor handled the settling of George’s estate and the $10,000 credit card debt was paid to the bank from his superannuation death benefit. The remaining balance of his assets went to May.

There are plenty of options available to help you deal with credit card debt after the death of a spouse or relative. If you're unsure which strategy is the most appropriate, 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 in your state through various 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.

StateLegal help
NSW
Victoria
South Australia
Queensland
West Australia
Tasmania
Northern Territory

Who else can I call 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.

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42 Responses

    Default Gravatar
    AlisonAugust 29, 2019

    Hi, I am helping to support a lady who is wondering what happens to her credit card debt when she dies – she is currently undergoing cancer treatment. she has no savings or any WILL, she has 2 credit cards that in total owe about $8000. she has funeral insurance which will cover her funeral and leave some. am I right in my thinking that the bank will ask for the money from the funeral insurance to pay off the credit card debt?

    Reply
      Default Gravatar
      NikkiAugust 30, 2019

      Hi Allison,

      Thanks for getting in touch and sorry to hear about the lady you’re caring for. Kudos to you for being so nice to her. When she passes, her estate is usually responsible for paying off any remaining debts you have. If the credit card debt is only in the name of the deceased cardholder, the liability will be paid out of the deceased’s estate. 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 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.

      To help you further, there is free, independent legal advice available in your state through various government-run and not-for-profit legal associations. You can find the name of the organizations and numbers on our page above. Scroll down on the page and find it in the FAQs.

      Hope this helps!

      Best,
      Nikki

      Reply
    Default Gravatar
    LilaJune 3, 2017

    I have been separated from my husband for almost twenty years, but not officially divorced. Can I be held liable for any outstanding debts he may have when he dies? Would the law consider me his next of kin?

    Reply
      Default Gravatar
      JonathanJune 3, 2017

      Hi Lila!

      Thanks for your inquiry.

      Most of the time, you may only be held liable for your spouse’s debt, if you are a joint accountholder. You may get contact with our specific legal aid representatives in your state, by checking our FAQ on our guide, “What happens to credit cards after death.”

      Hope this clarifies.

      Cheers,
      Jonathan

      Reply
    Default Gravatar
    MaggieApril 22, 2017

    My husband is the primary card holder. I have the card too & can use it independently. What happens to the outstanding balance should he die. We are pensioners & live in a village with a 45 year lease. Will I or my family be responsible for the debt. We do not have any super or savings

    Reply
      Avatarfinder Customer Care
      HaroldApril 24, 2017Staff

      Hi Maggie,

      Thank you for your inquiry.

      If the credit card is in a joint account, the other primary cardholders will be liable to pay the remaining outstanding balance. If the credit card debt is only in the name of the deceased cardholder, the liability will be paid out of the deceased’s estate. If there’s not enough money to cover the cost of the debt, the creditor is likely to offer you a payment plan or write off the debt.

      I hope this information has helped.

      Cheers,
      Harold

      Reply
    Default Gravatar
    carolineMarch 16, 2017

    My daughters dad died she is next of kin he has a mortgage of 250000 and credit card debt of 40.000 the house is worth 400000. does it come out of the estate

    Reply
      Avatarfinder Customer Care
      MayMarch 17, 2017Staff

      Hi Caroline,

      Thank you for your inquiry.

      Basically, if the cardholder dies, the remaining outstanding balance on his card will be paid out of the deceased’s estate. You’d be best to get in touch with the bank to help you with working out this matter. Alternatively, if you want to seek for a free independent legal advice, you can contact the number (in your relevant state) listed in the FAQs section above.

      Cheers,
      May

      Reply
    Default Gravatar
    ChristineMay 26, 2016

    Hi there,

    My Dads de facto recently passed away quite suddenly and has left behind 15k in credit card debt . They were both pensioners and there is no money left in her estate, the only asset she owned was half of the house they bought together, her will states that the home becomes my fathers until his death.

    My father doesn’t have the funds to pay the credit cards and is now worried the credit card companies will force him to sell the only asset which is his home, can you tell me if this is a likely scenario.

    Thanks

    Reply
      Avatarfinder Customer Care
      MayMay 31, 2016Staff

      Hi Christine,

      Thanks for your inquiry and I’m sorry to hear about your family’s lost.

      If your father happens to be a joint account holder or co-signatory, he will become solely responsible for the debt and should shoulder the monthly repayments. If not, what he needs to do is to immediately contact the credit card company to inform them about his spouse’s death and ask that any interests be frozen so that the debt doesn’t continue to increase.

      Although there is no absolute assurance, in case that the debt is greater than the assets left behind, sometimes, the credit card issuer will be forced to write off the debt as a loss. But before they do that, they will still do everything they can that the debt should be paid off. So it’s best that you help your father contact the card company and see what would be their advice and his options as well. He can also prepare a copy of her death certificate if the credit card company would need it.

      I hope this could help.

      Cheers,
      May

      Reply
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