Dealing with the debts of someone who has died

Money Advice Service

Dealing with the death of a partner or family member is sometimes even more difficult when you have to sort out their debts. Our guide gives you advice on how to sort out someone’s debt after he or she has died. You can also seek help from a free debt advice service if you don’t feel confident in dealing with their debts.

Take stock of their debts

The first step to dealing with the debts of a partner or a family member who’s died is to take stock.

Go through their papers and financial statements, and make a list of everything owed.

You also need to identify if these debts are:

You’ll also need to check if there is a guarantor for any of these debts – the guarantor remains liable for any debt covered by a guarantee if it is not paid by the estate.

There is a different way of dealing and paying off each type of debt.

So, it’s important for you to know what type of debt the person who has died had.

Individual or joint debts

Individual debt is where one person has taken out the debt in his or her name.

A personal credit card where there is still an unpaid balance is an example of individual debt.

Joint debt is where two or more people have taken out a loan in both their names.

A joint mortgage and a joint current account with overdraft are examples of joint debt.

Read our guide to Find out more about the liability of individual and joint debts.

Secured debts or unsecured debts

Secured debt is where a person has taken out a loan against an item or asset.

A home mortgage or a car loan are examples of secured debts.

An unsecured loan is more straightforward – you borrow money from a bank or another lender and agree to make regular payments until it’s paid in full.

A home improvement loan or a student loan are examples of unsecured debts.

Find out more about the liability of secured and unsecured debts.

Undisclosed debts

Occasionally, after all the debts are paid, you might find a debt that you knew nothing about.

To avoid this, you can advertise in a local newspaper before you start arranging to pay the debts.

This gives the deceased’s creditors time to come forward with their claims.

You aren’t under a legal obligation to place a Deceased Estates Notice, but if you fail to do so, you could put yourself at risk. This is because if you distribute the Estate and a creditor then comes forward, you could be found personally responsible. You may therefore have to pay the debt from you own pocket.

How to pay off outstanding debts after a death

Step 1: Tell creditors that the person has died

There is a lot to do when you’re dealing with the debts and estate of a deceased.

Getting letters or phone calls from creditors demanding payment just adds to the stress of the situation.

So, contact the creditors and let them know that the person has died.

Tell them that you’re going through the legal process of dealing with the person’s estate.

You should also ask them for a letter or statement showing the outstanding balance on the debt.

Once they know this, they should back off and give you time to sort out the estate and debts.

If it’s an individual debt, they should also stop taking out regular payments from the deceased’s bank account(s) until the debt is settled in full.

Step 2: Check if there’s insurance

The next step is to check if the person took out any insurance to pay off the debt.

For example, a life insurance to pay off the mortgage in case of death.

You should do this no matter what kind of debt it is.

If there is insurance

Check the terms of the policy for what you can claim.

Some policies, such as payment protection insurance (PPI) usually only pay out for periods of unemployment or illness but not death.

You can then contact the insurance company to make a claim.

Once the claim is processed, you can use the money from the claim to pay off that debt.

If there is no insurance

You’ll need to contact the creditors to make arrangements to pay off the debts if they haven’t already made a claim on the estate.

For joint debts:

  • you should check the terms of the loan
  • ask them to take out your deceased partner’s name from the bills and transfer all future bills to your sole name
  • if you can’t afford to pay each instalment in full, see if you can renegotiate the repayments to an amount and schedule that you can manage.

Read the What if I’m struggling to pay the debts of someone who’s died? section below.

For individual debts:

  • ask for a statement or letter showing the outstanding balance on the debt
  • give them the name and contact details of the executor or administrator for the deceased’s estate. They’re responsible for making sure that the debt is paid from the estate.
  • if you’re the administrator of the estate, you’ll need to have probate or a grant of administration
  • the executor will pay the debts off in priority order.

Find out how to get probate in Sorting out someone’s estate when there is a will.

Step 3: Pay in priority order

Once you have probate or grant of administration, you can use the money in the estate to pay off the debts that aren’t covered by insurance.

Paying the debts first is more important than distributing the estate to the heirs.

You should pay off the debts in this order of importance:

  • secured debts, such as the monthly mortgage payments
  • reasonable funeral costs and the costs of administering the estate
  • unsecured debts, such as utility bills, unpaid rent, Council Tax and other taxes, repayment of overpaid benefits, credit cards.

If there are assets, such as a car or a house that if sold, could go towards paying off the debts, it’s an option worth considering.

If there are more debts than the estate can pay back, this is called an ‘insolvent estate’.

In this situation, it is best to seek the advice of a solicitor or a probate specialist.

Find a solicitor or probate specialist on the Law Society website.

What do I do if I’m struggling to pay off debts after a death?

It’s difficult to think about practical matters after a death, especially if it’s your partner.

It’s even more daunting when you have debts to deal with at the same time.

?

Did you know?

Most people who have got debt advice tell us they feel less stressed or anxious and more in control of their life again.

If you’re struggling to pay off joint debts after your partner dies, or if the drop in income makes it hard to pay your own debts, it can be hard to know where to turn.

It’s important to know you don’t need to struggle on alone with your debt worries.

There are many ways to manage your debts and some are more well known than others.

The one that is best for you will depend on your personal circumstances.

It’s always best to talk things through with an experienced free debt adviser before you make a decision about what to do.

How will a debt adviser help you?

A debt adviser will:

  • never judge you or make you feel bad about your situation
  • suggest ways to deal with debts that you might not know about
  • always be happy to talk to you, however big or small your problem might be
  • find ways to manage your debts even if you think you have no spare money
  • check you have applied for all the benefits and entitlements available to you.

You can contact an adviser in a way that’s best for you:

  • online
  • face-to-face
  • over the phone.

Find out where to Get free debt advice now

This article is provided by the Money Advice Service.

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Some important information about Rest Less Money

We want you to understand the positives, but also the limitations of using our site. We operate in a journalistic manner and therefore all information, guidance or suggestions provided are intended to be general in nature, and you should not rely on any of the information on the site in connection with the making of any financial decision.

When we set out to build Rest Less Money, we wanted to be a trusted place where you could find helpful information about financial matters affecting the over 50s. As a free to use resource, we try hard to provide the best information we can, but we cannot guarantee that we won’t occasionally make mistakes. So please note that you use the information on our site at your own risk, and we can’t accept liability if things go wrong.

Key things to remember when using Rest Less Money:

We do not offer financial advice – As a journalistic site, it’s important to know that we do not provide financial advice. You should always do your own research before choosing any financial product so that you can be certain it is right for you and your specific circumstances. If you are in any doubt, please seek professional financial advice from a regulated financial advisor.

No Liability – please note that you use the information on Rest Less Money at your own risk and we can’t accept liability for how you choose to use the information given on our site. We will often provide links to content or products and services available on other third-party websites. These are provided purely for your convenience and we cannot be held responsible for any content, or any of the products and services offered on any website that we link to.

 

Accuracy of Information – We try to make sure that all the information provided on Rest Less Money is correct at the time of publishing as we want it to be the most helpful resource possible. Sadly, we are not perfect however, and so we can make no guarantees as to the completeness, accuracy, adequacy or suitability of the information available on the site.
Whilst we work hard to try and provide accurate information, deals and prices can change, so whilst they may be correct at the time of writing, providers may subsequently decide to alter them later – so always double check first.

A final note on the Rest Less Community Forums – always remember that anyone can post their opinion on the Rest Less Community Forums, so it can be very different from our own opinion and may not be factual or well researched. Always be wary of any content posted on the forums and be sure to do your own research and due diligence on anything suggested. 

We hope you find Rest Less Money a useful resource and we would welcome your feedback at [email protected] on how to make it even better. For more information on any of the above you can read our full terms and conditions.

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