Dealing with debt after a death
Borrowing money in the current financial crisis is all too common and borrowing without giving little or no thought to the future is a hazardous game to play. What happens to this debt if you die, does it get written off? NO, the debt must still paid back even in death by any means. A surprising number of people assume that their debts will be written off when they die but this is just not the case (sadly)
People can also get into debt following a death due to the high costs of funerals and all the extras that go with them so they take out credit to cover the costs.
When a will is made the individual names someone to be the executor who will take care of all affairs after their death, if they die without having a will then an administrator is appointed to carry out these actions. When the person dies all of their assets are lump together this includes their house and property, insurance, money, shares and bonds. This is known as their estate.
The first task of the executor is to pay off any outstanding debts that are owed using the estate. The creditors that are owed money are usually paid in a certain order; mortgage then rent arrears, council tax, loans and credit cards and finally debts to the exchequer. Spouses or partners do not inherit the deceased’s debts unless they have acted as a guarantor against a loan or the house is jointly owned.
Nothing will be paid to any beneficiaries until the all of the debts have been paid off from the value of the estate. If the value of the estate is not enough to cover the outstanding debts and you jointly owned a house with a deceased individual then you may be forced to sell the property in order to satisfy the creditors but this all depends on your legal position.
Dealing with debt after a death can be hard to come to terms with as it’s a double blow and can really make life miserable in a short space of time. So to avoid unnecessary undue problems then remember to plan ahead for unexpected circumstances.
