Dealing with the Debt of Someone who has Died
Dealing with a death is always difficult, but sorting other issues such as debt can add stress to the situation. This factsheet will help you establish liability for debts when someone has died, how to treat different types of debt, how owning a property may be affected by a person’s death and provide you with contact details of organisations that also may be able to help you.
1) The deceased’s estate
When someone dies, anything they leave behind such as assets and debts are collectively called their estate.
A person’s estate can include:
- property, houses and or land
- savings in bank accounts or credit unions, shares and accounts such as ISAs
- personal possessions of value – cars, jewellery, collections and so on
An estate is described as insolvent if the debts are greater than the value of the assets. If this occurs an executor must still sort out any assets and make sure that any debts left behind are paid, settled, negotiated or written-off (cancelled).
If you are made executor and therefore in charge of an insolvent estate, it is important that creditors are paid in a set order of priority. If this is not done correctly, you as a representative can become personally liable. If you are unsure of how to do this you should contact us for advice.Back to top
2) Liability for debts after death
When someone dies, their debts will be unable to be recovered if:
- the debts were in their sole name (not applicable for joint debts)
- they had no guarantors on any of the debts
- they have left behind no estate, thereby no assets
If the person who dies had debts in joint names with someone else, the surviving person will be responsible for paying the whole amount of these debts. None of the balance of a debt will be written off because another party responsible for the debt has died.
A guarantor is someone who has legally agreed to pay someone else's debt if that person falls behind on payments. The guarantor must sign an agreement to agree to be a guarantor and will then be responsible for the whole debt if the person dies.Back to top
3) Jointly owned property
How a jointly owned property is treated will depend on how the property is set out on the deeds. The two most common arrangements are set out below:
- Tenants in Common: Each joint owner has a specific share of the property. The information detailing all joint owners’ share will be set out in the deeds. When one owner dies, their share does not automatically pass to the remainder of the surviving owners. The deceased person’s share will form part of the estate and will have to be made available to pay creditors and any beneficiaries named in the will.
- Joint Tenants: Each owner owns all the property and when one owner dies, their share automatically passes to the other owner. It does not form part of the estate available to creditors. Therefore, the property is not considered when working out whether the estate is insolvent.
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Housing Rights can assist you with queries in relation to a property when someone has died. You can contact Housing Rights on 028 9024 5640.
4) Housing rates debts
If there is jointly owned or jointly rented property, any other persons living there during the time the arrears was built up will be liable to pay any rates arrears even if their name was not on the bill. They are also then responsible for the ongoing rates payments. If someone has died and left behind a property that is vacant and will be sold, the personal representative of the estate can apply for a period or rate relief to allow the property to be sold.
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Land and Property Services can provide advice on housing rates arrears. Contact Land and Property Services on 0300 200 7801
5) Utility bill debts
If there is jointly owned or jointly rented property, the person still living there will be liable to pay any gas or electricity arrears if their name was on the bill. If their name was not on the bill the energy company may argue that they have benefited from the energy supply and so should pay the bill. If this happens and you are not in a position to pay you may need assistance from a debt adviser so contact us for advice.Back to top
6) Benefit overpayments
If someone who dies was claiming state benefits, it is the executor of the estate’s responsibility to ensure that the Department for Work and Pensions (DWP) are made aware that they have passed away.
The DWP may claim that they have paid the person who died too much benefit if they paid benefits after death, or had arrears they hadn’t repaid before they passed away. This debt is a benefit overpayment. If there has been a benefit overpayment you should firstly check that it has been worked out correctly, and once this has been established it should be treated as a debt and paid automatically from the estate. If you are need assistance at working out the benefit overpayment, contact us for advice.Back to top
7) Hire purchase or conditional sale agreements
Hire-purchase agreements are used to buy goods, such cars and other vehicles. The goods do not belong to the person who obtained them until they make the final payment.
Check the agreement to be certain that it is a hire-purchase or conditional sale before offering to return the goods to the creditor. If you are unsure how to do this contact us for advice. If the goods are not subject to a hire purchase or conditional sale agreement, they will become part of the deceased’s estate in probate.
If the goods are subject to a hire-purchase or conditional sale agreement, then as executor there are two options available to you:
- Contact the finance company to reclaim the vehicle and sell it. If the selling price covers the debt, the finance is settled. Normally the selling price will not cover the debt, so the deceased’s estate will still owe the finance company the outstanding difference.
- Enact a voluntary termination of the finance agreement. To enable this option, the deceased must have repaid more than 50% of the total amount payable in the agreement. If not, the executor can pay whatever is needed to bring the total paid to the agreement up to the 50% amount. The goods would then be collected by the finance company with no further balance to pay, assuming you have complied with all the other terms and conditions of voluntary termination.
8) Useful Contacts
|HMRC Bereavement Helpline
Phone: 0300 200 3300
HMRC Deceased Estate Helpline
Land and Property Services
Housing Rights Service
Age NI Advice Service