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Tackling your debts

What happens to someone’s debts if they die?

Posted 12 May 2016

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In most cases, you don’t need to pay off someone’s debts if they die. Read on to learn more.

We often hear from people that they are worried about what will happen to their debts when they  pass away. There can be a lot of confusion around this topic, so we’re going to try and dispel some myths and explain in simple terms how it all works. 

What happens to someone’s debts when they die depends on whether they have an estate and whether the debts they had were joint or single ones. 

Let’s have a look at this in a bit more detail. 

 

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Their estate may pay the debts

When we use the term ‘estate’, we mean the assets they leave behind. This can include, savings, property, possessions, investments and insurances. The estate (if they have one), will pay off any outstanding debts whether they are joint or not. 

Once the funeral costs and debts have been covered, any money left over can be given out to loved ones according to what is contained in their will. 

What if there’s no money in the estate?

Sometimes when people die they have little or no assets – so there’s no money in their estate to clear their debts.  The first thing to say is that you are never responsible for someone’s debts if they were in their name alone. Even if you were someone’s closest living relative, like their child or spouse, you are never expected to pay their debts once they’ve passed away. 

If you had joint debts with the deceased and there is no money left in the estate to pay these off, then you are responsible for paying the remainder of those debts off. In these cases you should contact the lender as soon as possible and explain what has happened. If managing the debt will be a problem, they may be able to put an arrangement in place that eases the strain, like giving you a payment holiday or reducing the amount you’re paying for a time. 

The first steps to getting things in order

Trying to put everything in order at such a difficult time can be an emotional and mental strain. And this is likely to be made even worse if you’re receiving letters from creditors demanding money. You should explain the situation to these creditors and ask for time to sort things out. 

 Here’s a checklist of the things you need to address, which will, hopefully, make things simpler:

• take a moment to go through the deceased’s paperwork and make a list of what they owe

• inform their creditors that they’ve passed away and ask for a letter confirming the balance of the debts

• check whether you’re liable to pay any joint debts in full yourself

• check whether they had life insurance, as – depending on the policy - this can cover any mortgage and other debts in the event of death

• check whether they had any payment protection insurance that covers certain credit repayments in the event of death

• check that any regular payments (like joint debts or utility bills) are not coming out of an account that was just in their name, as this account will be frozen.

Dealing with someone’s estate once they’ve passed away can be a complicated process. If this responsibility has fallen to you, professional help is available should you need it. 

Has bereavement caused your problem debt?

We know from helping many people over the years that unexpected life changes, like losing someone close to you, can be the route cause of debt problems. 

If you feel the death of someone close to you has caused your debts to become unmanageable, make sure you reach out for help. The Money Advice Service has a page dedicated to this topic, and, of course, our experienced advisors are ready to answer any questions you have. 

A debt solution may help if you’re struggling to maintain repayments at their current level. There are a few debt solutions available – which one is right just depends on your particular circumstances. 

You’re not expected to know straight away which solution is best - make sure you speak to an advisor first. They will go through your finances in detail and have a look at how much you can realistically pay towards your debts, if anything. Once they’ve done that they will be able to recommend the best way for you to tackle your debts.

There are also bereavement support services that can help you cope through this time from an emotional point of view. Just visit this NHS page, enter your postcode and find the nearest one to you. 

 

by Christine Walsh

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.