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Dealing with a deceased's debt

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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), investments, property and possessions.

After someone dies, their estate is handled by one or more 'executors'. The executors are often relatives or friends and/or a solicitor.

If the estate is worth above a certain amount, the executor will need special permission from the court - called Confirmation - to be able to deal with the person's affairs. This includes paying off their debts.

If there is 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.

Debts if you owned a home together

If you jointly owned your home with the deceased person 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 jointly without an automatic destination to the survivor in the title or jointly with an automatic destination to the survivor in the title.

Jointly with no destination to the survivor

In this case the share belonging to the person who has died becomes part of their estate and goes to whoever is mentioned in their Will or those who benefit under Intestacy law. 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.

Jointly with a destination to the survivor

In this case the deceased person's share passes automatically to you by survivorship.

However, even though it is now in your estate, you can't ignore the debts. Creditors can apply for sequestration of the deceased's estate within five years of the death.

Where sequestration is granted, the appointed trustee in sequestration could raise an action asking the Court to divide the property in two and force a sale.

How different debts are paid off

Mortgages

If 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 arrears

If you're a joint tenant in rented property you must pay off any rent arrears.

Council Tax and Rates

Anyone still living in the house is responsible for ongoing charges. If the property remains unoccupied, there may be certain exemptions and discounts available. You should contact the relevant authority to obtain details of these.

Fuel bills

If you've been living in the property jointly, you may be liable for fuel bill arrears. Contact National Debtline Scotland 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 Scotland for advice.

Personal loans, credit cards and credit debt

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 benefits

Any 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. The Department of Work & Pensions regularly lodges claims against estates for overpayment of benefits. They inspect the forms lodged with the Sheriff Clerk and compare the information there with information in their records relating to means tested benefit claims by the deceased. If they find any discrepancy they are likely to lodge a claim against the estate. You should always check before disbursing an estate especially if 6 months have not elapsed from the date of death that there are no outstanding claims for overpaid benefits.

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 Debtline Scotland

Address:

Tricorn House

51-53 Hagley House

Edgbaston

Birmingham

B16 8TP

Phone number: 0808 808 4000

Web address: National Debtline Scotland

StepChange Debt Charity

Address:

StepChange Debt Charity

Wade House

Merrion Centre

Leeds

LS2 8NG

Phone number: 0800 138 1111

Web address: StepChange Debt Charity

Citizens Advice Scotland

You can access their website by clicking on the following link: Citizens Advice Scotland