Debt and bereavement

In the unfortunate event that someone dies and that person has outstanding debt, the debts are generally recovered from any assets or monies that are left behind.

No one else is obliged to settle the debts unless there are outstanding debts which were in joint names or someone stood as guarantor (signed an agreement to say they would take responsibility for the debt should the debtor fail to repay the debt).

In the event of death when there is a joint tenant mortgage, the property would automatically pass over to the survivor. In the case of Tenants in common, the property would need to be formally transferred over to the survivor, as this is not an automatic process.

In the case of a joint tenancy, although the property automatically passes over to the survivor, the creditors can apply to the court for an insolvency administration order which means that the survivor would have to pay the value of the equity belonging to the deceased into their estate, up to the value of the outstanding debts.

For tenants in common, the deceased persons share of the equity would be first used to pay off any debts, then any monies left over would go to whoever was mentioned in the will or their next of kin.

If the deceased was in receipt of benefits, then the DWP must be informed of the death as soon as possible so that any payments made after the time of death can be repaid.

Creditors must wait until the estate is finalised before requesting any repayment. In the case where there are no funds available, the creditors will be informed and requested to write the debts off and to cease chasing for payment.

In any circumstances when a death has occurred and debts are outstanding, it is important to seek advice so you can be sure of the correct procedures when dealing with debts outstanding.

Call our specialist debt team on 08000 915 004 to find out how we could help you.