Dealing with the debts of someone who …
It can be difficult to manage debt of someone who has died in your family or close relative who has passed away as you would probably need to go through lots of paper work. You can also seek help from a debt advice service if you do not feel confident in dealing with problems of debt of your family member, relative or friend.
- Check the paper work and make list of credit commitments
- Ways to pay off debt when someone die
- Struggling to pay off debt
- Check the paper work and make list of credit commitments
The first step to dealing with the debts of a partner or a family member who has died is to prepare list of all creditors.
Go through their recent demand letters from creditors, and make a list of everything owed.
You would need to identify if there is any guarantor debt and inform them as the liability of the debt is to be borne by the guarantor.
In addition, you need to check if these debts are in individual name or with partner, .It is also important to check nature of the debt liability –Secured debt or unsecured debt.
Secured debt always has priority to be paid up and above unsecured debt.
Therefore, it is important for you to know what type of debt the deceased has.
There may be chances that you may not know few debts, which your relative had.
To avoid this problem, 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.
If you do not do this, you could find yourself years later having to deal with a creditor claiming on the estate.
- Ways to pay off outstanding debts after a death
Step 1: Firstly, Inform creditors that the person has died
Your relative’s creditors do not know the current situation and they can increase debt enforcement action for recovery of the debt if repayment is missed.
So, contact the creditors in writing and let them know that the person has died and you are now going through the legal process of dealing with deceased person’ estate.
Tell them that you are going through the legal process of dealing with the person’s estate.
If it is a joint debt, Creditors will ask other account holder to pay the debt, so contact a suitable debt advisor for further help in arranging monthly payment as per his/her affordability and a suitable debt plan must be chosen.
Step 2: Insurance policy/ies can help paying off debt
It is worth to check if there is any insurance policy in diseased name. Insurance policies are helpful in the event of unemployment, sickness and death event.
For example, a life insurance to pay off the mortgage in case of death.
Alternatively, Mortgage protection policy to pay off the mortgage debt if you die.
Alternatively, PPI policy to pay out lump sum towards credit cards and unsecured loans debt.
You should do this no matter if there is secured or unsecured debt, as it would surely keep the diseased financial burden off from left over estate.
You must contact insurance company for lodging the claim.
If there is no insurance policy
You will need to contact the creditors to arrange to pay off the debts if they have not already made a claim on the estate.
For joint debts:
- Ask your creditor to supply you loan agreement copy to see your joint liability
- Ask your creditor to take out your deceased partner’s name from the account and transfer it in your sole name
- If you cannot afford to pay each instalment in full, find a suitable debt advisor for help.
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 are 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 also 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 are not 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 mortgage
- Reasonable funeral costs and the costs of administering the estate
- Unsecured debts, such as credit cards, utility bills, unpaid rent, Council Tax and other taxes, and repayment of overpaid benefits.
If there are assets, such as a car or a house that if sold, could go towards paying off the debts, it is 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 you are struggling to pay off debts after the death of your partner?
If you are 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 is important to know you do not need to struggle on alone with your debt worries.
If you are in debt and would like advice or help, please get in touch. We offer free and confidential debt appointments and our advisers are more than happy to assist.
You will depend on your personal circumstances.
It is always best to talk things through with an experienced debt adviser before you make a decision about what to do.
How will a debt adviser help you?
A debt adviser will support in:
- Obtaining client permission for debt review
- Assessing the extent of client’s debt burden
- Providing options for an agreement of settlement with creditors
- Negotiating suitable terms with creditors
- Ensuring that clients’ stick to their debt payment terms
- To assess and review a client’s debt burden
- To assist in drawing up a settlement plan acceptable to creditors
- To manage and ensure that payments are made regularly and timeously as per the agreement reached with creditors
- Check you have applied for all the benefits and entitlements available to you.
You can contact our debt advisers in a way that is best for you:
- Over the phone.
Rajnish Tyagi is an experienced and Cert DR qualified debt adviser at Acme Credit Consultants Ltd. He specialises in offering suitable debt solutions to clients. He can be contacted at firstname.lastname@example.org website: www.acmecredit.co.uk