Dealing with the debts of someone who has passed away

Dealing with the debts of a deceased partner or family member can add another layer of distress to an already difficult time. Read on to find out how you can best manage their debts. Remember, if you don’t feel confident dealing with the debt management of the deceased’s estate by yourself, you can also seek help from a free debt advice service.

In This Guide:

• Take stock of their debts
• Let creditors know that the person has passed away
• Check if the debts are covered by insurance
• Pay off debts in priority order
• What to do if you're struggling to pay off debts after death

Take stock of their debts

The first step is to go through all their papers and financial statements, making a list of everything owed. You should also check if there is a guarantor for any of these debts. A guarantor would remain liable for any debt covered by a guarantee if it isn’t paid off by the estate.

There are different ways of dealing with, and paying off, different types of debt. So, it’s important that you distinguish whether the debts are individual or joint debts, and if they’re secured or unsecured debts.

Individual debts are taken out in the person’s own name. For example, a personal credit card with an unpaid balance is an individual debt. Joint debts are taken out in two or more people’s names. An example of this is a joint mortgage.

Secured debts are loans which are taken out against an item or asset, for example a home mortgage or a car loan. Unsecured loans are when you borrow money from a bank or other lender and agree to make regular payments until it’s paid in full. An example of this is a student loan.

Let creditors know that the person has passed away

You should contact any creditors and let them know the person has died, so that you don’t get letters or phone calls from them demanding payment. Let them know that you’re going through the legal process of sorting out the person’s estate. Once you’ve done this, they should leave you be, giving you time to sort out the estate and debts. Make sure you also ask them for a letter showing the outstanding balance of the debt. If the debt is an individual one, they should also cease to take payments from the deceased’s bank account.

Check if the debts are covered by insurance

See if the person took out insurance to pay off any debts. For example, their life insurance might pay off their mortgage.

If there is insurance, check the terms of the policy to see what you can claim. Some policies, like payment protection insurance (PPI), only pay out during unemployment or illness, but not death. Contact the insurance provider and make a claim. When the claim is processed, you may use the money from the claim to pay off the debt.

If there isn’t insurance, you’ll need to contact the creditors to make arrangements in regard to paying off the debts. With joint debts, you should ask them to take your deceased partner’s name from the bills and transfer all future bills to your name. If the payments are unaffordable, try and renegotiate the payments so that you can manage them.

For individual debts, you should first ask for a letter showing the outstanding balance of the debt. Next, give them the contact details for the executor or administrator of the deceased’s estate. The executor will then pay off the debts in order of priority. If you’re the administrator, you need to get a probate or a grant of administration.

Pay off debts in priority order

When you have a grant of administration or a probate, you can use the money from the deceased’s estate to pay off any debts that aren’t covered by insurance. Paying off outstanding debts should take priority over distributing the estate to heirs, to make sure you have the maximum amount of money to give to creditors. The order of importance should be as follows:

1. Secured debts, like monthly mortgage payments
2. Funeral costs and the costs of administering the estate
3. Unsecured debts, like energy bills and Council Tax

What to do if you're struggling to pay off debts after death

You should contact a free debt advisor. The one that will suit you best depends on your personal circumstances, so explore all the options available to you. A debt advisor will never judge your situation, and will always be happy to talk, no matter how small or large the problem is. They will be able to suggest ways to deal with debt that you didn’t know about and check that you have applied for all the benefits and entitlements that are available to you. There are many ways to contact an adviser, such as online, face-to-face, or over the phone.