What happens to your debts when you die?

What happens to your debts when you die? It’s a simple enough question and one that many would like the answer to whether it’s for your own debts or a family member’s. Will they be wiped off or will they need to be paid?

The answer is that they will need to be paid and the money will be taken out of the estate of the deceased. You will only be responsible for their debts if you had a joint loan/agreement with them or you provided a loan guarantee. You are not automatically responsible for the debts of your husband, wife or civil partner.

As we are not specialists in the legalities surrounding death, we recommend that you get in touch with a solicitor to discuss this issue in further detail.

How debts are dealt with?

The estate of any person is made up of their property, possessions, investments and cash (including life insurance pay outs). Estates are handled by one or more ‘personal representatives’, either named in the will or the next of kin. Any estate worth over £5000 will require probate or letters of administration to be obtained in order to be able to deal with the affairs.

If you jointly own a house with the deceased, what happens regarding shares and paying off debts depends entirely on how you own the house and if there is a will. With a will in place, it is simply a case of following the wishes of the person who has died regarding the house and other assets.

However, where no will is left, whether you are ‘tenants in common’ or ‘joint tenants’ will have a significant effect on how you will need to deal with outstanding debts on the house and who will inherit the deceased’s share of the property. To find out more about this, visit nidirect.gov.uk

Different types of debts

There are many different types of debts that a person could have that will need dealing with after death, these include:

• Mortgages – Life insurance may cover the mortgage amount. However if there is not any insurance or there is a second mortgage not covered by insurance the property may have to be sold. However, there are options available to you such as being able to take over the mortgage. It is always advisable to approach the mortgage provider to discuss options available to you.
• Rent – Having a joint tenancy with the deceased would mean you are liable for any debts owing whereas if you take over a tenancy after their death, you will not be liable for those debts.
• Loans, credit cards etc. – These debts solely in the name of the deceased should be dealt with but after other debts including mortgages. If they are joint debts, they are the responsibility of the person who held the debt with the deceased.
• Energy – If you and the deceased were living jointly then you may be liable dependent on circumstances.

Now you know what happens to debts after your death, you can find out what you need to do to deal with the debts of someone who has died.

If you have questions surrounding issues with debt in this situation, get in touch with us to discuss your options. For further information surrounding money, wills and debts in death, get in touch with a solicitor.

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