Do You Inherit Debt In Canada?

Understanding Debt Inheritance in Canada

Ever pondered over the question, “Do you inherit debt in Canada?” If yes, then you’re definitely not alone. The ins and outs of debt inheritance can be a complex topic. This article aims to clarify the subject by exploring whether it’s possible to inherit debt in Canada, what happens to credit card debt after death, and how to avoid inheriting debt or creating it after death.

Is it Possible to Inherit Debt in Canada?

The simple response to the question, “Do you inherit debt in Canada?” is predominantly “no.” When a person passes away, their debts, be it from credit cards, mortgages or loans, do not automatically pass on to their children, partner, or other relatives. However, there are exceptions to this rule under certain circumstances.

For instance, if you’re a co-signer on a joint account or credit card, the debt becomes your responsibility if the other co-signer passes away. If you had legal responsibility for the debt while the borrower was alive, you remain responsible for it if they die. This is one of the few situations where debt can be inherited in Canada.

What Occurs with Credit Card Debt after Death?

Credit card debt, like other forms of debt, cannot be transferred to another party unless that party was a co-signer on the account or part of a joint account. But, creditors can attempt to recoup their money by making a claim on the debtor’s estate before any inheritance is paid out to beneficiaries.

For instance, if a person has unresolved credit card debt at the time of their death, the assets of their estate might be used to pay off the outstanding credit card balances before any inheritance is distributed. If the deceased has no assets, the credit card debts remain unpaid.

Ways to Avoid Creating or Inheriting Debt after Death

While debt is typically not inherited in Canada, there are circumstances that can lead to a form of “debt inheritance.” Here are some tips to help avoid creating or inheriting debt after someone’s death:


Avoid Co-Signing or Taking on Joint Debt: If you co-sign a loan or debt, you will be held completely responsible for the balance should the borrower stop paying for any reason, including death.

Be Cautious of Supplementary Credit Cards: Some companies may try to hold the supplementary cardholder equally responsible for repaying the entire balance. Avoid having supplementary credit cards from accounts that aren’t yours.

Avoid Becoming a Guarantor for Someone Else’s Credit Cards: If someone doesn’t have a good credit score and can’t apply for a credit card or get other financial services because of it, they may look for another person to be their guarantor so that they can get approved.

Consider a Term Life Insurance Policy: Those with joint debts or who have co-signed loans with a loved one can often take out a term life insurance policy to pay off these shared debts if they pass away suddenly.

Talk to Your Parents or Loved Ones about Debt after Death: Have an open conversation about debt in general. Eventually, you may want to work your way up to talking about what to do about debt after death.

Watch out for Collection Agencies that Contact Survivors: Often, debt collectors can make survivors of a debtor feel that it is their responsibility to pay off their loved one’s debt.

Create a Will to Prevent Intestacy: It’s always a good idea to create a will of your own, so you can state exactly how you would like your estate to be distributed.

Give out to Your Inheritors Before Death: It’s becoming more and more popular to give an inheritance before death in Canada.

Set up a Repayment Plan to Get Yourself out of Debt: If you have debt, it’s important to address it as soon as possible, and learn what your options are and what would happen if you don’t pay it off.


Navigating Debt Inheritance in Canada: Key Points to Remember

Here are three important things you can do to avoid inheriting debt or losing inheritable assets to collection agencies:


Send the Death Certificate to Creditors: If there is debt left behind and there are no assets, simply send a copy of the death certificate to each creditor so the debt can be purged off their books.

Set Aside Beneficiary Money to Pay Outstanding Bills: If there is debt left behind and there are assets in the estate, the creditor can make a claim against the estate in order to recoup the money owed.

Get Professional Legal Advice: Complicated financial situations are best navigated with professional and/or legal advice to ensure you are properly protecting yourself.



The loss of a loved one is a difficult time. The last thing you need is the added stress of dealing with their financial affairs. While the answer to “Do you inherit debt in Canada?” is typically “no,” there are some exceptions, particularly when you’ve co-signed a loan or have joint accounts. Knowledge is power, so understanding how debt is handled after death in Canada can help you avoid unnecessary financial burdens.

If you’re worried about your own debt, there are options and resources available to help you. Taking control of your financial situation now can prevent future complications and allow you to leave a positive financial legacy for your loved ones.

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