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.
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.
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.
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.
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.
What do I do if I’m struggling to pay off debts after a death?
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.
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.
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:
- over the phone.