What happens to debts when someone dies?
When someone dies, any debts they leave are paid out of their 'estate' (the money and property they leave behind). You're only responsible for their debts if you had a joint loan or agreement or provided a loan guarantee - you aren't automatically responsible for a husband's, wife's or civil partner's debts.
The estate A person's estate is made up of their cash (including from insurance) and investments, property and possessions.
After someone dies their estate is handled by one or more 'executors' - or an 'administrator' if there wasn't any will. These are usually a relative or friend and/or a solicitor.
If the estate's worth above a certain amount the executor or administrator will need special permission - called 'probate' or 'letters of administration' - to be able deal with the person's affairs. This includes paying off their debts.
What happens if there's not enough money to pay off all debts? In this case, the estate has to pay off any outstanding debts in a set priority order before anything is given to people named in the will, or until the money runs out. Use the following link and scroll down to find out more.
Debts if you owned a home together If you jointly owned your home and there's not enough money elsewhere in the estate to pay off the deceased person's debts, there is a chance that your home would have to be sold. Your options to avoid a sale depend on whether you owned it as 'tenants in common' or 'joint tenants'.
'Tenants in common'In this case each of you owned a stated share of the property. The share belonging to the person who has died becomes part of their estate and goes to whoever is mentioned in their will. But if there are outstanding debts these must be paid first from that share. To avoid a sale of the home you and/or anyone due to inherit the second share will need to try and negotiate with those owed money ('creditors') and find the necessary money.
'Joint tenants'In this case you owned the whole property together and the deceased person's share passes automatically to you.
But even though it's now in your estate, you can't ignore the debts. Creditors can apply for an 'Insolvency Administration Order' within five years of the death. This can have the effect of dividing the property in two and force a sale. So it's in your interest to try to come to an agreement with people who are owed money, and try to pay them yourself.
Information as to whether you own the property as 'tenants in common' or 'joint tenants' may be shown in the Transfer or Lease by which you acquired the property or in a Trust Deed or in a Will. In addition the land register may also provide a clue but Land Registry cannot advise you on which kind of ownership you have chosen.
You can view or download a copy of the Land Registry’s Public Guide 18 – Joint property ownership for more information.
How different debts are paid off MortgagesIf the mortgage lender required life insurance this may pay off the full amount of the loan. If there isn't any insurance - or if there were second mortgages not covered by insurance - the property may have to be sold.
Rent arrearsIf you're a joint tenant in rented property you must pay off any rent arrears.
Water ratesAnyone still living in the house is responsible for any arrears and for ongoing charges, even if their name isn't on the bill.
Council TaxAnyone still living in the house is responsible for any arrears and ongoing charges, even if their name isn't on the bill. (But there's a 25 per cent reduction for being the only adult in the house.) Council Tax stops if no one's living in the house.
Fuel billsIf you've been living in the property jointly you may be liable for fuel bill arrears. Contact National Debtline for advice - details below.
Hire purchase (HP agreements)The buyer doesn't own the property until the last payment has been made. But if over one third of the agreement has been paid, the seller needs a court order to get the goods back.
Before returning goods or making payments, check to see if there was a payment protection plan. Also contact National Debtline for advice.
Personal loans, credit cards and credit debtRepayment of these debts must wait until others have been settled. If cards are held jointly, any debts will be the joint holder's responsibility - but check to see if you're covered by a payment protection plan.
Tax debts and overpaid benefitsAny tax owed or overpaid benefits or pension would be paid out of the estate. To prevent benefits overpayments and check if tax is owed contact the relevant office as soon as possible. You'll find contact details on relevant paperwork, or you can search online.
Checking for insurance to cover debts Always check carefully to see if the deceased person's debts are covered by:
- death cover for a mortgage
- payment protection cover for personal loans or credit cards
- 'death in service' from a pension (payment of a lump sum if the person dies before pension age)
Where to get help and advice You can get free and independent advice on debt from a number of organisations:
National DebtlineNational debtline offers free, confidential, and independant advice on how to deal with debt problems for people in England, Scotland and Wales. you can call their helpline or download free factsheets from their website.
Citizens Advice Bureau (CAB)Your local CAB will provide free information and advice on legal, money and other problems. You can find the address of your local CAB in the phone book or on their website.
Consumer Credit Counselling Service (CCCS)The CCCS offers a helpline, providing free, independent and impartial advice to people with debt problems.
More useful links
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