When someone dies and leaves behind debts, managing these financial obligations can be complex and overwhelming. This guide aims to help you understand which debts need to be repaid and what steps you need to take.
What’s in this guide?
- What Happens to Debts When Someone Dies?
- Who Has to Pay Off the Debts?
- Sorting Out the Debts of Someone Who Has Died
- How to Pay Off Debts After Death
- What Do I Do if I’m Struggling to Pay Off Debts After a Death?
What happens to debts when someone dies?
When someone dies, their debts become a liability on their estate. The executor or administrator of the estate is responsible for paying any outstanding debts from the estate.
If the estate doesn't have enough money or assets to pay all the debts, they are paid in priority order until the funds run out. Any remaining debts are typically written off. If there is no estate, the debts usually die with the deceased. Surviving relatives aren't typically responsible for these debts unless they acted as a guarantor or are a co-signatory.
Who has to pay off the debts?
The executor or administrator of the estate must handle the payment of debts. Being an executor does not make you personally liable for the estate's debts, but there are exceptions, and the role does come with some risks.
To protect yourself from potential unidentified creditors, you should publish a death notice in The Gazette and a local newspaper where the deceased lived.
If the estate is large or complicated, it might be wise to seek advice from a solicitor or probate specialist. Here at Wills Services, we have a specialist team ready to help. Just go to our contact page, fill in a quick form and one of our specialists Will be in touch.
Sorting out the debts of someone who has died
The first step in sorting out the debts is to identify what debts are left and what types of debts they are.
- Gather financial documents - Review papers and financial statements to make a comprehensive list of all debts.
- Check for guarantors - Identify if there is a guarantor for any debts. If so, the guarantor is responsible if the estate cannot cover the debt.
- Classify the debts - Determine if the debts are individual, joint, secured, or unsecured.
Types of debts
- Individual debts - These are debts in the deceased’s name only and can be paid from the estate. If the estate can't cover these debts, they Will be written off.
- Joint debts - If a loan was taken out jointly, the surviving individuals are typically responsible for the debt. Check for any insurance policies that might cover these debts.
- Secured debts - These debts are tied to an asset, such as a property. The handling of these debts depends on how the asset was owned.
- Unsecured debts - These are not secured against any asset and creditors Will have to wait until priority debts are paid.
How to pay off debts after death
Step-by-step process:
- Notify creditors - Contact creditors to inform them of the death and request a statement of the outstanding balance.
- Check for insurance - Determine if the deceased had any insurance policies that could pay off the debt.
- Pay debts in priority order
- Cover funeral and administrative expenses first.
- Pay secured debts, then priority debts like taxes.
- Finally, pay unsecured debts.
If the estate is insolvent, meaning the debts exceed the estate’s value, the most important debts are paid first, and any remaining debts may go unpaid.
What do I do if I’m struggling to pay off debts after a death?
If you’re having trouble paying off joint debts or your own debts due to a loss of income after a partner’s death, you don’t have to face this alone. Experienced debt advisers can help you explore your options and find the best solution for your situation.
