Learning Centre

Does a person’s debt go away when they die in Canada?

No, debt does not go away when a person dies. In Canada, the debt is paid with money the deceased person leaves behind. The estate will sell the person's assets to have enough money for the debt. The debt will not be paid if the estate runs out of assets.

Typically, no one is required to pay someone else's debt. The Executor of the estate is responsible for paying the debts out of the money in the estate but does not have to pay the debt with their own money.

Exceptions to Personal Liability

There are a few situations in which someone alive is responsible for paying the debt of someone who passed away. Joint account owners, co-signers of loans, and individuals residing in community property states where certain marital debts are shared may have personal liability for the debts.

That's because most loan agreements say both co-signers are responsible for the debt. If both co-signers pass away, then the debt would not be paid by anyone still alive.

What happens to a mortage when you die in Canada?

Your family may be forced to sell your home after you pass away if your other assets don't cover what's left of your mortage. The good news is mortgages are typically secured by the home itself, providing an asset that can be utilized to settle the outstanding mortgage balance.

Additionally, if your spouse is still alive and can afford the mortage payments, the mortage can transfer to them without triggering a sale of the house. You will need to write a will to ensure the house is transfered to your spouse efficiently.

The Role of Life Insurance

One effective strategy for ensuring that your debts are settled after your passing is to obtain a suitable life insurance policy. Life insurance provides a tax-free benefit upon death, which can be used to pay off debts and tax liabilities, safeguarding your savings and assets for your loved ones. Many people purchase life insurance policies when they're concerned about paying off their mortage when they die.

Planning Ahead and Crafting a Comprehensive Will

Any money left after paying debts is distributed according to a person's estate plan. Writing a comprehensive will prevents disputes among family members after you pass away.


While certain types of debt, such as credit card debt, may not have a significant impact on your loved ones after you pass away, it is crucial to consider the proper handling of your mortgage. Mortgages represent substantial financial obligations, and without careful planning, they can potentially lead to the sale of your family home, affecting the inheritance you leave behind.

To ensure that your mortgage is handled correctly and in accordance with your wishes, it is highly recommended to have a well-drafted will in place. By naming your spouse as the main beneficiary in your will can provide clear instructions for the transfer and management of your mortgage. This proactive step will help safeguard your family home and provide financial security for your surviving spouse and beneficiaries.

LegalDeeds can help you write a legally-valid Canadian will for only $50. Secure your peace of mind today.



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