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WHAT HAPPENS TO CREDIT CARD DEBT WHEN YOU DIE? A WIDOW’S HUGE VICTORY

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what happens to credit card debt when you die

What Happens to Credit Card Debt When You Die? Introduction

What happens to credit card debt when you die? Credit card debt can’t follow you to the grave but it does live on. It is paid off from estate assets. But if there are no or insufficient assets in the Estate, what then? The traditional thinking and what the bank’s documents say is, that it becomes the responsibility of a joint account holder. That is certainly the advice we gave in our 2019 Brandon’s Blog titled: CREDIT CARD DEBT AFTER DEATH IN CANADA: WHO IS RESPONSIBLE?

Remember that classic hit “I Fought the Law” with the epic line, “I fought the law and the law won”? This tune, penned by Sonny Curtis of the Crickets, got a killer cover by the Bobby Fuller Four, hitting the top ten charts back in 1966. Their rendition even snagged a spot at No. 175 on Rolling Stone’s list of The 500 Greatest Songs of All Time in 2004. And to top it off, the Rock and Roll Hall of Fame dubbed it one of the 500 “Songs that Shaped Rock” that same year. Talk about a rock ‘n’ roll anthem! This Brandon’s Blog is about a widow who fought the law and the widow won!

In a recent legal case at the Supreme Court of British Columbia, the Royal Bank of Canada faced off against Carol Smith (no relation to us) in a debt dispute over a Royal Bank Visa credit card balance. The case delves into intricate details, including the primary issue of Mrs. Smith’s liability for the debt accumulated on the credit card. Let’s dissect the facts, arguments, and final judgment in this high-stakes legal showdown.

What Happens to Credit Card Debt When You Die? Credit Card Debt and Death

How Credit Card Debt Is Handled After Death

Two weeks ago, I wrote the Brandon’s Blog: HOW TO PAY OFF CREDIT CARD: CANADIANS NAVIGATING TO HUGE CREDIT CARD DEBT CRISIS. That blog dealt with issues facing credit card holders when they are alive and their unpaid debt, not about a deceased person.

When someone passes away with outstanding credit card debt, the responsibility for repayment typically falls to the deceased’s estate. The Estate Trustee is responsible for notifying creditors of the death, as well as determining the total amount of debt owed and using the assets of the estate to settle the debts.

If the deceased’s estate is unable to cover the full amount of debt, or even before the bank makes that determination, it will make a demand on any joint account holder or supplementary credit card holder. Individuals need to plan and consider the impact of their credit card debt on their estate to ensure a smooth and orderly resolution of their financial affairs after their passing.

Impact of Credit Card Debt on the Estate

Credit card debt can have a substantial effect on an individual’s estate. Creditors possess the legal entitlement to assert claims against the estate to have their outstanding debts paid from its assets. The Estate Trustee is required to adhere to a specific protocol ensuring all estate debts are properly identified, resulting in a delay before beneficiaries can anticipate receiving their allocated shares from the estate. Settlement of estate debts consequently diminishes the total amount distributed to each beneficiary.

If estate debts exceed the value of the estate, the Estate Trustee is well advised to put the estate into bankruptcy and allow whatever assets there are to pay for the bankruptcy process. This will protect the Estate Trustee given his or her liability taken on by being the Estate Trustee. It will also allow the estate assets to be administered according to the law by a licensed insolvency trustee to treat all creditors fairly.

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what happens to credit card debt when you die

What Happens to Credit Card Debt When You Die? Dealing with Credit Card Debt After Death

Checking for Life Insurance Coverage

The appointed Estate Trustee is advised to promptly inform creditors of the deceased person’s passing and explore any potential insurance coverage that may apply. It is recommended to engage the services of a financial advisor or legal expert to effectively navigate the intricacies involved in settling credit card debt post-mortem. By conducting a comprehensive review of insurance policies and seeking professional assistance, individuals can adeptly handle and resolve any outstanding debt obligations left by the deceased individual.

It is important to first check if the deceased had any insurance coverage that may help cover outstanding debts. This includes checking for credit card balance insurance, mortgage insurance, or any other relevant life insurance policy that may provide coverage. It is advisable to contact the relevant credit card companies, the bank that holds the mortgage and any insurance providers to whom the deceased’s records show payments were made.

Selling Assets to Pay Off Debt

The obvious option in dealing with the debts of the estate when there are sufficient assets, is selling enough of them to pay off the debt. This process involves identifying any valuable assets left behind by the deceased, such as real estate, vehicles, or investments, and liquidating them to generate funds to settle the outstanding debts.

It is essential to collaborate closely with qualified professionals to ensure the legal and ethical execution of this process. By liquidating assets to settle credit card debt and other secured debt or unsecured debt posthumously, one can effectively manage the financial matters of the deceased and facilitate the distribution of remaining assets per the decedent’s directives.

Things become more involved if the deceased wishes specific assets to go to certain beneficiaries, rather than just the cash generated from the sale of all the assets.

The above information is standard for any Estate Trustee to follow, including when we act as an Estate Trustee. But what is the credit card issuer’s position if there is a joint credit card holder? That is what the case of Royal Bank of Canada v. Smith, 2024 BCSC 963 from the Supreme Court of British Columbia is all about.

What Happens to Credit Card Debt When You Die? Introduction to the Case

Let’s dive into the intriguing case between the Royal Bank of Canada (RBC) and a widow, Carol Smith. This legal battle has caught my attention not so much due to the complexities surrounding the debt dispute, but because of the parties involved. Let me walk you through the overview, disputes, and RBC’s application for summary judgment in this case.

Parties Involved

Firstly, we have RBC, the largest financial institution in Canada with a wide reach and unlimited resources. On the other side, we have the widow Carol Smith, the defendant in this case. The contrast between a gargantuan bank and an individual defendant adds an interesting dynamic to this legal conflict.

Debt Dispute and Amount

The crux of the matter lies in a debt dispute over a substantial amount. RBC claimed that Carol Smith owes a total of $51,764.09, including the principal amount and accrued interest on a credit card debt. This significant sum raises questions about the circumstances leading to this debt and the responsibilities of the parties involved.

The bank said the defendant applied for the credit card on February 14, 2001. The deceased Mr. Smith incurred the vast majority of charges on the credit card, and Mrs. Smith made her first charge on June 1, 2015. Over time, the credit limit on the credit card increased, and as of August 25, 2016, the credit limit was $24,000.

The Smiths paid off their monthly credit card balance in full for the first few years, but in late 2016 the balance slowly began to rise. By late 2017 the balance was over the credit limit, and in January 2018 the credit limit was increased to $28,000. Page 7 The last new charges on the card were made in May 2018, and the last automatic payment was made on October 19, 2018.

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what happens to credit card debt when you die

Purpose of Plaintiff’s Application

The RBC as plaintiff filed for summary judgment under Rule 9-7 of the Supreme Court Civil Rules. This application seeks a swift resolution to the dispute, considering the substantial sum at stake and the nature of the issues involved.

Carol Smith acknowledged the suitability of a summary trial, paving the way for a focused legal process to determine the outcome. Her position was that she rarely used her RBC Visa Credit Card, but when she did, she believed she was an authorized user on her husband’s credit card and he was solely responsible for all balances.

Obviously, like every other court case, it comes down to the evidence.

What Happens to Credit Card Debt When You Die? Facts and Evidence Presented

As I delve into the details presented before the court, which involved the Royal Bank of Canada and the defendant, Carol Smith, a clear picture emerges regarding the credit card dispute at hand. The key elements of the case are:

  1. Details of the primary cardholder and the credit card application: The primary cardholder of the credit card in question was Mrs. Smith’s late husband, Alfred Smith. Upon his passing, the focus shifted to determining Mrs. Smith’s liability for the debt accumulated on the card.
  2. Analysis of the Cardholder Agreement terms and obligations: A meticulous review of the Cardholder’s Agreement terms revealed the responsibilities associated with being a co-applicant or an authorized user. The bank relied upon what it stated were the standard definitions and clauses within the credit card agreement.
  3. Examination of the evidence presented by both parties: The court meticulously examined the evidence put forth by both the plaintiff and the defendant. This included witness testimonies, documentation, and arguments presented to ascertain the facts surrounding the case.

From the application process to the complexities of the Cardholder’s Agreement, each element was meticulously scrutinized to determine the liability of the defendant in the outstanding debt matter. Evaluating evidence and legal arguments provided a comprehensive view of the case, offering insights into the intricacies of credit card disputes and contractual obligations.

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what happens to credit card debt when you die

What Happens to Credit Card Debt When You Die? Legal Analysis and Arguments

The courtroom environment, characterized by its atmosphere of anticipation and adherence to procedural rules, provides a structured platform for a thorough analysis and scrutiny of the pertinent facts in question.

Evaluation of Mrs. Smith’s Liability and Contractual Obligations

The crux of the matter lies in determining whether Mrs. Smith, as the widow of the primary cardholder, is indeed liable for the substantial debt accumulated on the credit card. The legal framework, as outlined in the Cardholder’s Agreement, forms the basis for defining the extent of her obligations.

The Bank contended that Mrs. Smith, by accepting and using the credit card, implicitly agreed to be bound by the terms and conditions outlined in the Cardholder’s Agreement. However, Mrs. Smith vehemently denies ever applying for the credit card or consenting to its terms, raising crucial questions regarding the validity of her liability.

Comparison with Similar Cases and Legal Precedents

In legal matters as complex as this, precedent plays a significant role in shaping the outcome. Drawing parallels with previous cases, such as Royal Bank of Canada v. Klassen, 2013 BCSC 631 (CanLII), sheds light on the importance of clarity in determining co-applicant status and consent to credit limit increases.

Through a comparative analysis of these cases, it becomes evident that the burden lies on the bank to substantiate Mrs. Smith’s status as a co-applicant and prove explicit consent to credit limit enhancements. Failure to meet this burden could sway the decision in favour of the defendant.

Interpretation of the Cardholder’s Agreement and Consent to Credit Limit Increases

The interpretation of the Cardholder’s Agreement, particularly concerning credit limits and consent to increases, emerges as a focal point in the legal discourse. The agreement’s language regarding express consent to credit limit enhancements becomes a pivotal factor in determining liability.

As I navigate through the nuances of contractual interpretation, the obligation to review monthly statements and identify errors within a specified timeframe adds a layer of complexity to the case. Mrs. Smith’s adamant denial of ever applying for the credit card underscores the need for concrete evidence to establish her contractual obligations.

In the intricate web of legal analysis and arguments, every detail matters. The meticulous examination of Mrs. Smith’s liability, comparison with legal precedents, and interpretation of the Cardholder’s Agreement paint a vivid picture of the intricate tapestry of the legal system.

What Happens to Credit Card Debt When You Die? Comparison with Previous Cases

As I delve into the details of the current case at hand, I can’t help but draw parallels to a significant legal precedent – the Royal Bank of Canada v. Klassen case. This previous case holds valuable insights and implications that can greatly impact the current judgment.

RBC claimed that its normal practice in the credit card application process was to send a copy of the Cardholder’s Agreement to the cardholders together with the credit cards. RBC further stated that Mrs. Smith breached her agreement with it and that Mr. and Mrs. Smith are jointly and severally liable for the amount owing.

Mrs. Smith denies being a co-applicant and submits that she never expressly consented to any increases to the credit limit. Mrs. Smith denies ever applying for a Bank credit card and further denies ever agreeing to the terms of the Cardholder’s Agreement. If she were a co-applicant, Mrs. Smith or Mr. Smith would need to have given express consent to the credit limit increases.

Reference to the Royal Bank of Canada v. Klassen Case and Its Implications

Looking back at the Royal Bank of Canada v. Klassen case, it becomes evident that there are striking similarities in the issues raised. In that case, the Bank sought judgment against Mr. Klassen for a credit card issued to Ms. Faa. Mr. Klassen’s defence rested on the premise that he was only an additional user on Ms. Faa’s account, not a co-applicant.

The Court’s ruling in the Klassen case highlighted the importance of clear documentation and evidence. As Mr. Klassen denied signing the Co-Applicant Form, the Bank’s failure to produce this crucial document cast doubt on the entire case. The Court ultimately sided with Mr. Klassen due to the lack of concrete evidence supporting the Bank’s claims.

Analysis of the Similarities and Differences in the Two Cases

Now, shifting the focus to the current case, the Court grappled with similar contentious points. Just like in the Klassen case, the issue of co-applicant status and liability comes to the forefront. The bank’s assertions regarding Carol Smith’s involvement with the credit card and the associated liabilities raise key questions that need to be addressed.

One notable similarity between the two cases lies in the burden of proof placed on the bank. In both instances, RBC is tasked with substantiating the claims against the defendants. However, the nuances in each case, particularly regarding the application process and consent to terms, present distinct differences that warrant careful examination.

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what happens to credit card debt when you die

What Happens to Credit Card Debt When You Die? The Final Judgment

Reflecting on the case of Royal Bank of Canada v. Smith, it is essential to delve into the intricate details that led to the final judgment and conclusion, which holds immense significance for all parties involved.

Summary of the Court’s Decision and Reasoning

Having closely examined the evidence presented before the court, it became evident that RBC sought a substantial sum from Mrs. Smith, following the debt accumulated on a credit card. However, after a thorough analysis, it was concluded that the bank failed to produce the actual documentation to establish Mrs. Smith’s liability for the outstanding balance and accrued interest on the card. The court meticulously considered the Cardholder’s Agreement terms, the lack of concrete evidence, and the nuances of Mrs. Smith’s involvement in the credit card application.

Implications of the Judgment on the Parties Involved

The judgment in this case carries profound implications for both the Royal Bank of Canada and Mrs. Smith. It underscores the importance of clear documentation, individual liabilities, and the burden of proof in financial disputes. The Bank’s evidence was what the normal practice of the bank is and what the Cardholder’s Agreement says. However, there was one big problem. RBC was unable to provide a cogent explanation for the Bank’s failure to produce the actual application for Mrs. Smith’s credit card.

For the bank, it serves as a reminder of the necessity to adequately substantiate claims and prove liabilities. On the other hand, for Mrs. Smith, it signifies a just outcome that vindicates her in the face of financial allegations.

What Happens to Credit Card Debt When You Die FAQs

The answers below of course must be considered with the above case in mind.

  1. What happens to credit card debt after death in Canada?
  • The treatment of credit card debt upon death remains consistent in Canada. It is typically settled using funds from the deceased individual’s estate. In cases where a co-signer is present on the credit card account, they may assume responsibility for the full amount owed.
  1. What happens to debt if someone dies with no estate?
  • In the circumstance where an individual passes away with outstanding debts and lacks sufficient assets to settle them, typically, those debts will remain unpaid. An exception to this would be if the deceased had jointly signed for the debt with another party, in which case the co-signer would assume responsibility for repayment of the remaining balance.
  1. Do not pay back a creditor if it’s not a requirement. Is this true for credit card debt after death?
  • Creditors have the legal right to pursue the assets of the deceased individual’s estate to settle outstanding credit card debts post-mortem. It is important to note that the obligation to settle these debts generally does not extend to other family members unless they have specifically co-signed on the credit account in question.
  1. Can credit card debt be transferred to another party after death?
  • Credit card debt is not transferable to another party unless that party was a co-signer on the account or as part of a joint account. Following the passing of the account holder, the responsibility for settling the credit card debt lies with the deceased’s estate, which must address this obligation before distributing assets to beneficiaries.

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    what happens to credit card debt when you die

What Happens to Credit Card Debt When You Die Conclusion

One of the pivotal takeaways from this case is the significance of contractual obligations and the need for explicit consent in financial agreements. More importantly, it shows the need to be able to produce the actual documents you are relying upon. It underscores the critical role of evidence and clarity in establishing liabilities. Additionally, it highlights the importance of due diligence in legal proceedings and the weight of proof in matters of debt and financial responsibility.

I hope you enjoyed this what happens to credit card debt when you die Brandon’s Blog. Do you or your company have too much debt? Are you or your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt.

You are worried because you are facing significant financial challenges. It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. The way we take the load off of your shoulders and devise a plan, we know that we can help you.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

The information provided in this Brandon’s Blog is intended for educational purposes only. It is not intended to constitute legal, financial, or professional advice. Readers are encouraged to seek professional advice regarding their specific situations. The content of this Brandon’s Blog should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc. as well as any contributors to this Brandon’s Blog, do not assume any liability for any loss or damage resulting from reliance on the information provided herein.

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what happens to credit card debt when you die
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WHAT HAPPENS TO YOUR MORTGAGE WHEN YOU DIE? OUR AWESOME COMPREHENSIVE GUIDE FOR CANADIANS

what happens to your mortgage when you die
what happens to your mortgage when you die

What happens to your mortgage when you die? Introduction

There comes a time in everyone’s life when we must face the inevitable truth of our very own death. While it may not be the most pleasant topic to discuss, it is vital to consider the financial ramifications that may arise after we die. Specifically, have you ever questioned what occurs to your home mortgage loan when you pass away in Canada? In this Brandon’s Blog, we will explore this important topic, clarifying the function of beneficiaries, mortgage protection insurance, as well as estate preparation in addressing what happens to your mortgage when you die.

When a loved one passes away, the problem of dealing with their assets, liabilities, and all financial issues falls upon the shoulders of one or more of their survivors. One of the most substantial issues among all the types of debts the deceased may have had is the remaining mortgage loan balance and how it will be managed. Will your beneficiaries inherit this financial obligation, or can it be removed through specific processes? Feel confident, we will certainly provide you with valuable information as well as the positive steps to guarantee your legacy continues to be secure.

Comprehending the function of beneficiaries in mortgage affairs is of utmost importance. There is a way during your lifetime that you can shield your loved ones from acquiring the concern of your financial commitments. We will certainly guide you with the details of beneficiary classification, helping you move through the needed paperwork to choose the most ideal option(s) for your particular situation.

In addition, we will explore the essential role of life insurance coverage in the context of mortgages after death. A life insurance policy can function as a financial safety net that not just covers funeral expenditures yet can also be used to settle your mortgage debt. We will review various sorts of life insurance policy plans and their benefits, enabling you to make knowledgeable choices that protect your loved ones from unnecessary financial pressure.

Lastly, we will certainly explore the value of estate preparation in ensuring a smooth transition of your home, your other possessions and your mortgage. Appropriate estate planning allows you to manage just how your assets are dispersed, including your home mortgage. We will walk you through the elements to take into consideration when developing an estate strategy, such as creating a trust or thinking about joint ownership, providing you with the tools to secure your heritage and also supplying financial safety and security to your loved ones. We will discuss all the concepts but what we won’t talk about is how to draft your Will. That is a discussion you need to have with your lawyer.

Now is the time to gain a detailed understanding of what happens to your mortgage when you die in Canada. By taking proactive steps, you can safeguard your loved ones from a prospective financial concern and make sure a smooth changeover for your estate. Join us as we delve into this subject, supplying our thoughts and guidance to assist you in securing your legacy. Read more now!

What happens to your mortgage when you die? Understanding the basics of a mortgage

Defining a mortgage and its key components

A mortgage is a financial contract in which a mortgage lender offers funds to a consumer to acquire a property. It consists of numerous vital parts, such as the funding amount, rates of interest, payment duration, and regular monthly installments. Comprehending these elements is necessary to realize what occurs to a mortgage when you pass away. It is vital to acknowledge that the responsibility for making the monthly mortgage payments lies with the consumer, despite their life conditions. Nonetheless, there are actions you can take to protect your loved ones from the problem of a mortgage obligation after your death, including beneficiary classification, life insurance, and estate planning.

Understanding the Basics of a Mortgage

To grasp the ins and outs of what happens to your mortgage when you die, it is essential to initially understand the basics of a mortgage and your specific mortgage document. This section intends to supply a clear description of regular mortgage conditions. By familiarizing themselves with these terms, individuals can better navigate the complexities of the home mortgage process. People need to fully understand everything about their mortgage, including, the rate of interest and payment schedule, insurance policy requirements and penalties for defaulting, to be able to plan your estate properly. By acquiring a strong understanding of the essentials, readers can have self-confidence when considering their estate options.

The role of a co-borrower or co-signer

When it involves mortgages, understanding the role of a co-borrower or co-signer is critical as there is a difference if there was just a sole owner responsible for the mortgage obligation. A co-borrower is somebody that authorizes the mortgage contract as well as shares equivalent responsibility for the mortgage loan.

They have possession rights over the home and are just as accountable for making the mortgage loan repayments. On the other hand, a co-signer is someone that gives their credit reliability to help secure the loan but does not have any type of ownership legal rights. They are only responsible for the payments if the primary borrower stops making the payments.

Having a co-borrower or co-signer can provide extra security for the lending institution as well as may improve the opportunities for lending approval.

what happens to your mortgage when you die
what happens to your mortgage when you die

What happens to your mortgage when you die? The impact of death on a mortgage

Exploring the implications of death on mortgage payments

When a house owner dies, their home loan doesn’t simply disappear. The lender still has a lawful right to the home until the mortgage is paid off. If the mortgage remained in the property owner’s name alone, the estate will require to repay the balance. This can be done by selling the building or making use of funds from the estate.

If the mortgage was jointly held because there is a joint owner of a property, the surviving co-borrower will take control of the obligation of making the regular monthly payments, assuming they can afford to do so on their own. It is necessary to plan for the effect of death on a home mortgage loan by thinking about life insurance and your will to make sure that loved ones are not strained with mortgage payments after a house owner passes away.

Discussing the lender’s rights and options in such scenarios

When it pertains to what happens to your mortgage when you die, it is essential to recognize the rights and also choices of the loan provider. In such situations, lending institutions have the right to examine the situation and make a choice concerning the mortgage loan. They can choose to accelerate the loan and demand the need for instant payment or they can allow the surviving co-borrower to continue making payments.

In Ontario, lenders have the option to initiate the power of sale proceedings if the mortgage falls into arrears. It is important to be familiar with these options and plan for them when you are alive to protect your estate.

Sale clause in a mortgage agreement

In every standard mortgage, there is a sale clause. This stands as a typical provision included in the majority of mortgage contracts. This provision empowers the lender to demand complete repayment of the mortgage balance in the event of a property sale. The sale clause aims to safeguard the lender’s stake in the property since they have invested a substantial amount in the mortgage.

For borrowers, it becomes crucial to grasp the terms of their mortgage agreement and the possible ramifications of triggering the sale clause. Should a borrower intend to sell their property, seeking consultation with their lender becomes imperative to ascertain the terms and conditions required to steer clear of triggering the sale clause.

What happens to your mortgage when you die? Outlining the options available to settle a mortgage after death

When managing to settle a mortgage debt after death of the borrower, there are 2 choices offered to Canadians:

  1. Pay off the balance of the mortgage utilizing life insurance plan proceeds. Making certain that you have appropriate mortgage loan insurance in place permits you to utilize those funds for home mortgage payments, alleviating the worry of the family members you left behind.
  2. Another choice involves the estate of the deceased person. Depending on the conditions, the estate may have the capability to cover the mortgage loan by making use of other assets.

It’s essential to extensively think about these choices and consult estate planning professionals to make certain you protect your loved ones by adequately covering this financial debt.

Exploring the possibility of paying off the mortgage using life insurance proceeds

When it involves what happens to your mortgage when you die in Canada, one possibility is to explore using a life insurance plan to pay off the home mortgage loan balance. By having a life insurance plan in place, you can make use of the funds to repay the loan, thereby saving your family from that financial stress. This can be either a separate life insurance policy or specific mortgage insurance offered by the lender. You should carefully check out both types, as costs and qualifying for each type could vary significantly.

This enables them to save residential real estate without the obligation of a mortgage loan. Participating in this proactive method demonstrates a degree of financial responsibility and insight, ensuring your family members’ security and also safeguarding your legacy. Consider reviewing this choice with an experienced financial expert to evaluate the possibility of obtaining such insurance policy protection as well as understanding what the insurance premiums will be.

The role of the deceased individual’s estate in mortgage settlement

When considering what takes place on your mortgage loan upon your demise, recognizing the function of the departed person’s estate in mortgage settlement is critical. The estate, encompassing the dead person’s properties as well as obligations, plays an important part in identifying just how the mortgage will be settled. This may require selling off the property or selling off various other assets of the estate to raise funds for clearing the mortgage loan balance.

It is essential to have a well-prepared estate plan to make certain a seamless strategy for your Estate Trustee to follow, benefitting your beneficiaries and family after your passing away. Seeking support from legal and financial experts can assist navigate you with this process.

what happens to your mortgage when you die
what happens to your mortgage when you die

What happens to your mortgage when you die? Transferring the mortgage to another party

The concern surrounding your home mortgage’s destiny after your passing presents a possibility to plan ahead of time for the transfer of ownership to a loved one while at the same time knowing that the house will be protected and transferred according to your wishes. This mortgage transfer requires considering legal and financial elements and preparing the required documentation. This will require experienced guidance to navigate the procedure with the utmost skill.

Experts fluent in this area can assist with preparation, giving detailed guidance on the necessary actions while offering beneficial insights right into possible obstacles that may develop. By planning ahead of time for the transfer of both the mortgage as well as the property, you can protect your loved ones from the burden of needing to deal with this added burden after you are gone, ensuring financial safety and convenience.

The transfer of a mortgage following your death necessitates careful consideration of possible obstacles as well as legal and financial repercussions. You need to account for various elements, such as guaranteeing the prospective borrowers fulfill the loan provider’s requirements for assuming the home mortgage, in addition to fulfilling different obligations, such as making sure that the appropriate registry is updated and all necessary parties are alerted to the change of ownership.

In the context of what happens to your mortgage when you die, looking for specialist guidance for your planning is essential to make sure a smooth transfer of both the property and the mortgage happens after your death. The intricacy and also ins and outs involved in transferring both the mortgage obligation and its connected property can be overwhelming and challenging for the majority of individuals.

By getting in touch with seasoned specialists, you can guarantee a smooth and dependable change. These specialists have the needed expertise to navigate any prospective obstacles, using tailored options to match your special situation and assist in completing a smooth and orderly process easily when the time comes.

What happens to your mortgage when you die? Joint mortgages and death

For your basic estate planning when you are a joint mortgage borrower, understanding the complexities involved in a joint mortgage for the surviving borrower holds paramount relevance. Upon the death of one of the joint mortgagors, the remaining borrower might run into various issues with the mortgagee that were not anticipated. The obvious issue will be the ability of the remaining borrower to make all necessary mortgage payments without the joint borrower being alive to continue contributing. There will also be certain administrative details such as assuming sole possession of the property. If the remaining borrower cannot afford to keep the property, then marketing it to settle the mortgage debt is an obvious solution.

To proactively plan for this situation, both borrowers need to have an agreement and a plan in place as to what will happen upon the death of one of the joint borrowers. Seeking guidance from an estate planning expert is well-advised. By looking for professional recommendations, you can get a clear and detailed understanding of your legal rights and also obligations, thereby allowing you to choose the optimal course of action to safeguard the situation for both your joint borrower and your beneficiaries.

In such scenarios, it comes to be critical to confer with your lawyer to ensure the solution of a well-crafted strategy that meets everyone’s requirements. Thorough estate planning is of the utmost value. Protecting your interest in the property and also making sure the seamless transfer of your mortgage upon your death needs a comprehensive plan, including the relevance of your will.

what happens to your mortgage when you die
what happens to your mortgage when you die

What happens to your mortgage when you die? Importance of estate planning

Discovering the utilization of wills, trusts, and other legal strategies is pivotal in safeguarding your mortgaged property in the event of your passing. These tools allow for proper estate planning. A diligently prepared will certainly makes certain that your mortgaged property is duly resolved, assuring the protection of your loved ones from problems after you are gone.

Additionally, should the family situation be such that added protection is necessary, the use of a trust can offer added security by selecting a trustee to manage the property as well as disperse funds for mortgage payments. This is especially useful either where a minor child is involved or the adult child beneficiary may not be able to properly handle all aspects of property ownership.

Seasoned professionals can focus on these intricacies as well as can adeptly lead you through the procedure, assuring the protection of your legacy. In Canada, proper estate planning holds the utmost significance when a mortgage is also attached to the property, particularly when pondering the fate of the home and the mortgage after death. To navigate the complicated legal terrain, involving the services of a professional estate planner and lawyer becomes crucial.

What happens to your mortgage when you die? Conclusion

Recognizing what happens to your mortgage when you die in Canada holds vital relevance. This knowledge proves important in protecting your loved ones and cementing your legacy. Beneficiaries will be considerably affected by the ongoing mortgage obligations following your death. However, relying only on beneficiaries might prove insufficient or inappropriate.

To make sure extra safety and security and to ease the economic concerns after you are gone, it is advised to invest either in a life insurance policy as well as participating in thoughtful estate planning. By gaining valuable insights and taking aggressive steps, you can make certain that your mortgage won’t end up being an encumbrance rather than an ongoing way that your property will be protected and available for your beneficiaries.

I hope you enjoyed this what happens to your mortgage when you die Brandon’s Blog. In our role as a licensed insolvency trustee, we have had to administer the bankruptcy of many insolvent deceased estates. But what about when the deceased estate is not insolvent but there are other seemingly insurmountable problems?

That is why several years ago, we opened up a division of Ira Smith Trustee & Receiver Inc. called Smith Estate Trustee Ontario. We act as Estate Trustees for solvent estates where various problems arise requiring the appointment of an independent Estate Trustee. Some of the reasons why this service is necessary are:

  1. There is no will so the person died intestate.
  2. There is a will but the Estate Trustee(s) named in the will do not wish to act so they recuse themself(ves).
  3. Ongoing litigation makes it a requirement that an independent Estate Trustee be appointed to safeguard and liquidate the assets while litigation continues or until a settlement is reached.

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CANADIAN BANKRUPTCY DISCHARGE: CRITICAL ILLNESS INSURANCE IN A BANKRUPTCY

Canadian bankruptcy discharge: Introduction

Many times during the administration of a Canadian bankruptcy, the licensed insolvency Trustee (formerly called a bankruptcy trustee) (Trustee) comes across a novel issue. The decision of A.R. Robertson, a Registrar in Bankruptcy in Calgary, Alberta in the bankruptcy discharge application of Shirley Rose Cooke has such an issue within it.

The case is Cooke (Re), 2018 ABQB 628 (CanLII). The issue that came before the Court was, what happens to a critical illness benefit payment for the undischarged bankrupt? Does it go to the Trustee or is the undischarged bankrupt debtor able to keep it? This topic should be of interest to accountants, lawyers, insurance agents and financial planners, in addition to Trustees.

Canadian bankruptcy discharge: The issue

Registrar Robertson described this case as an “interesting application” for bankruptcy discharge. The matter was heard on July 9, 2018. Ms. Cooke is 62 years old. She filed for bankruptcy on April 12, 2016. The issue to be decided is whether a critical illness benefit payment she obtained in the amount of $25,000, forms part of her assets which fall to the Trustee. The Trustee’s position was that it is an asset of the bankruptcy Estate and Ms. Cooke’s creditors are entitled to it.

Canadian bankruptcy discharge: The facts

In March 2016, Ms. Cooke was diagnosed with breast cancer. She went through surgery and had radiation treatments until July 2016. Prior to her medical diagnosis, she worked full time as a healthcare worker. She stopped working in March 2016 as a result of her diagnosis and need to undergo surgery and radiation. She returned to part-time work at her former employer, in about August 2016.


Her evidence was that at the time that she left her full-time work, her employer informed her she had the critical illness benefit policy and that she should apply under it. Apparently, she was unaware of this policy as being part of her benefits package. She applied for the benefit payment.

When she made her assignment in bankruptcy, she did not divulge the critical illness benefit application to the Trustee. She advised the Court that she did not have any type of certainty that she would receive the benefit. Eventually, she did, in January 2017. When she did, she advised her Trustee.

Canadian bankruptcy discharge: The Trustee’s position


The Trustee took the view that the critical illness benefit payment was a component of the insolvent person’s income under s. 67 of the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA). S. 67 of the BIA deals with property of the bankrupt, while s. 68 of the BIA deals with surplus income. However, s. 67 of the BIA does cover certain exclusions of types of payments a bankrupt may receive. The kinds of payments carved out are normally government type payments that have an overarching social aim, such as GST/HST tax credit payments.

It was very clear from the evidence that had she known she was going to get a $25,000 insurance payment from the insurance company, she would likely not have entered bankruptcy. Had she divulged the benefit application to the Trustee, the Trustee may very well have recommended she not go bankrupt.

The Trustee desires that Ms. Cooke pay the amount of $20,000 as a condition of her discharge. The Trustee states that in dealing with this critical illness benefit issue, including research, its fee now approximates that amount. I find it interesting that the Trustee is requesting the majority of her critical illness benefit payment as a discharge condition.

If the Trustee truly believes that the benefit payment should be considered as income under s. 67 of the BIA, then the correct treatment would be for the Trustee to redo its surplus income calculation under s. 68 of the BIA for Ms. Cooke. Then see what her surplus income obligation would be. If the Trustee is really trying to say the benefit payment is an asset that should come to the Trustee, then they should be asking for the entire $25,000. From my reading of the Registrar’s decision, it appears that the Trustee did neither but merely is asking for an amount to cover its costs!

Canadian bankruptcy discharge: The Registrar’s analysis


The Registrar indicated that in order to determine what is the appropriate condition if anything, he would have to assess the fees charged by the Trustee. If the Registrar really meant that he would have to tax the Trustee’s fee and costs, that makes sense. Otherwise, I am not sure what the connection is between the Trustee’s fee and costs, and whether a conditional discharge should be granted.

Ms. Cooke’s legal counsel referred to the Registrar the facts under s.173 of the BIA that could lead to an absolute discharge from bankruptcy not being granted. Her legal counsel indicated that none of the factors that would allow for a conditional, suspended or refused discharge apply in this matter.

The Registrar encouraged both parties to provide him with whatever additional information or authorities they thought appropriate by Tuesday, August 7, 2018.

The Trustee provided the Court with additional material. One such item was a copy of a letter sent by the Trustee to Ms. Cooke advising that, in the Trustee’s view, the critical illness benefit is a survivor benefit and not a wage or wage substitute. So much for it being part of surplus income!

The Registrar correctly pointed out that none of the exemptions in s. 67 of the BIA mention a critical illness benefit payment. The Registrar could also not find a precedent exactly on point.


The closest cases the Registrar could find were those of when the undischarged bankrupt suffered an injury in a motor vehicle accident and had a claim for pain and suffering. In that case, the action is personal to the injured person, and therefore that claim does not fall under the definition of property of the bankrupt available to the Trustee.

The Registrar stated that he sees no sensible distinction why a tort-based damages insurance claim for pain and suffering would be dealt with in a different way than a contract-based insurance policy for the pain and suffering Ms. Cooke had from her illness.

Accordingly, the Registrar decided that the critical illness benefit payment did not create a component of property designated to the Trustee. He also stated that Ms. Cooke did not have to pay any amount, to the Trustee. The Registrar went on to say that the Trustee should have brought on an application to have this matter determined much earlier in the bankruptcy proceedings so that the Trustee would not have incurred as many costs as it had.

The Registrar directed that:

  1. Although the Registrar did not explicitly state it in his judgment, the implication certainly is that Ms. Cooke received an absolute discharge from bankruptcy.
  2. Moreover, the Trustee should bring on the application for the Trustee’s discharge.
  3. Similarly, the Trustee should keep the Registrar’s comments as to the Trustee should have brought on a motion on the critical illness benefit issue earlier when submitting its dockets to have its fee and costs taxed by the Court.

Canadian bankruptcy discharge: Do you have too much debt?

I hope that none of us ever suffer from such a critical illness. However, it is good that Ms. Cooke had that insurance coverage. Do you have too much debt, or debt that you can’t repay because life got in your way? Illness and job loss are two prime factors in reducing someone’s income and increasing their expenses. It could force people to have to live off of credit cards until there is no credit room left, and no ability to ever repay the debt.

If you have too much debt, contact the Ira Smith Team. We have years of experience in helping those people and companies where life got in the way. Perhaps you need a debt settlement plan. Alternatively, if bankruptcy is the only real answer, we can help ease the stress and pain of bankruptcy for you.

Our approach for each file is to create an end result where Starting Over, Starting Now takes place. This starts the minute you are at our door. You’re simply one phone call away from taking the necessary steps to get back to leading a healthy, balanced hassle-free life. Call us today for your free consultation.canadian bankruptcy

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