In this series of articles, we answer commonly-asked questions about estate planning – wills, enduring powers of attorney and estate administration – to help you and your whānau make informed decisions.
Public Trust's Justine Wood steps through what happens to your debt when you die.
We get asked this question a lot. Does a family member have to pay it? Does it get written off?
When someone passes away, their estate assets are used to pay off any outstanding debts before any assets are distributed to beneficiaries. In most cases, debts are settled from the estate.
There are different types of debt and there’s a difference between debt in a person’s sole name and joint debt. Let’s look at some common scenarios.
What happens if you don't have any assets? Is your debt wiped or do family have to pay it?
Generally, debts in the deceased’s sole name would not become the responsibility of family members. (There might be an occasional exception, for example if a family member owes a debt to the estate or has provided a personal guarantee to any debt.)
When the person has more debt than the value of the estate assets, it’s called an insolvent estate. In this case, the Insolvency Act 2006 outlines the legal process and the priority in which types of debts must be paid. Typically, estate administration costs and funeral expenses are paid first before all other debt.
Insolvent estates are complex and rare. A person’s debts may be partly or fully written off if the party owed money agrees.
What happens to my student loan debt when I die?
Around 600,000 New Zealanders have student loans, so it’s a type of debt that impacts many of us. The median balance is around $17,500 as at late 2025, but for many the balance is substantially more.
In New Zealand, student loans are written off when a person dies.
Who pays the debts and sorts everything out? It sounds like a lot of work.
Whoever is administering the person’s estate is responsible for ensuring all debts are paid.
When you write a will, you name an executor (either a person or an organisation like Public Trust) who is responsible for administering the estate, and that includes paying debts.
Yes, it can be a big job, which is why many people name Public Trust as executor.
How does a will help make this process easier?
If you die without a will, the administration of your estate can be more expensive, take longer and be stressful for your loved ones.
Wills can also help as they involve naming an executor to administer your estate, including repaying debts. You’ve got an assigned person (or trustee organisation like Public Trust) who can complete the work right from the start.
Another helpful tip is to keep a list of your debts. Having it recorded somewhere and keeping details of contracts and agreements can be very helpful during estate administration.
Wills don’t really help with debt management, but they do allow people to have in-depth conversations about what people would imagine happening with their assets and debts when they pass away, and clearly outline their wishes.
Kind regards,
Justine Wood, specialist at Public Trust
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