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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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By

Amy Bradney-George

Updated

Fact checked

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
ANZ1800 237 170
Westpac1300 130 240
Commonwealth Bank1800 686 153
NAB1300 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.

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

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.

  1. Victorian Law Reform Commission webpage
  2. LawAccess NSW webpage
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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
      jonathan.chan@findercrew.comJune 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
      HaroldApril 24, 2017Finder

      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
      MayMarch 17, 2017Finder

      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
      MayMay 31, 2016Finder

      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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