- What Happens To Credit Card Debt When You Die?
- When the estate loses, beneficiaries lose
- Six steps to take when a credit cardholder dies
- 1. Get organized
- 2. Prevent further credit card use — it could spell trouble
- 3. Get multiple copies of the death certificate
- 4. Notify credit card companies of the death
- 5. Contact the three credit bureaus
- What Happens to Credit Card Debt When the Card Holder Dies?
- Who Pays Your Credit Card Debt When You Die
- Special Cases
- If Creditors Ask, Should You Pay?
- What Happens to Your Debts After You Die
- Who can inherit your debt?
- What types of debt can be inherited?
- Mortgages and home equity loans
- Credit card debt
- Car loan
- Student loans
- What creditors can and can't take
- Debt collectors
- What happens to credit card debt after death
- Sometimes, the credit card company loses
- Changes in rules of engagement
- Community property complications
- State that employ community property law
- What about the assets?
- Hounded after death
- When collection calls come
- What to do with accounts after a death
- Laura’s story
- Dealing with the debts of someone who has died
- What happens to debts when you die?
- Who has to pay off the debts?
- Sorting out the debts of someone who has died
- Individual debts
- Joint debts
- Secured debts
- Unsecured debts
- Undisclosed debts
- How to pay off debts after death
- Step 2: Check if there’s insurance
- If there is insurance
- If there is no insurance
- Step 3: Pay in priority order
- What do I do if I’m struggling to pay off debts after a death?
- How will a debt adviser help you?
What Happens To Credit Card Debt When You Die?
Credit card debt doesn’t follow you to the grave; it lives on and is either paid off through estate assets or becomes the joint account holder’s or co-signers’ responsibility.
In community property states, most debts acquired during a marriage are the responsibility of the community (the couple) —even if only one spouse is listed on the account.
When the estate loses, beneficiaries lose
Even if you’re not held personally liable for the debt on a credit card, you’ll feel the effects of it if you’re a beneficiary of the estate.
That’s because debts will be paid from the estate before beneficiaries receive any distributions.
In other words, any debts left behind when a loved one passes away can quickly gobble up any of their remaining assets, leaving beneficiaries with what is left (if anything at all).
Also, note that there is a specific period of time for creditors to file a claim against the estate. When an estate is probated, creditors are also prioritized.
Credit card debt is unsecured, un a mortgage that’s secured by property, or a car that is secured by the vehicle.
For that reason, it’s ly the credit card company will be at the back of the line when it comes to paying debts from the estate.
And, it or not, beneficiaries are often even further down the line than credit card companies. That means If the estate doesn’t have enough money to pay all debts, beneficiaries could be liable to pay the remaining debt, but only if they’re a joint cardholder, co-signer or married to the deceased and live in a community property state.
Six steps to take when a credit cardholder dies
When someone dies, the task of notifying financial institutions and closing credit card accounts can easily be forgotten or pushed aside. Unfortunately, plenty can go wrong if these critical tasks are neglected.
For example, identity thieves may troll obituaries and online records looking for recently deceased persons they may be able to impersonate to create new accounts. Hackers may also look for ways to steal from existing accounts of the deceased, which you may not notice if you haven’t notified banks and card issuers of the death quite yet.
Here are six steps you should take when a cardholder dies to prevent these issues and more:
1. Get organized
If you know before someone dies that you will be the personal representative or executor, you should start putting systems in place to make your job easier when the time comes.
Start by organizing all the person’s financial accounts.
If you’re a court-certified representative or surviving spouse, you can also request a copy of the deceased’s credit report, which lists all accounts in their name.
“Sometimes, people can be on a credit card and not even know it,” says Pennsylvania attorney Linda A. Kerns. “Maybe when they filled out the credit card applications, (the joint cardholder) didn’t even tell them.”
These accounts could show up years later, at the time of a death or divorce. “I tell people to check their credit card reports regularly. Resolve it before a death or divorce or traumatic event,” says Kerns.
2. Prevent further credit card use — it could spell trouble
When someone dies, his or her credit cards are no longer valid. You should never use them or let anyone else use them — even for legitimate expenses of the deceased, such as a funeral or their final expenses.
Continuing to use a credit card as an authorized user after the cardholder’s death is the most common way people unknowingly commit credit card fraud, and it could get you into big trouble. Estate lawyers recommend collecting all credit cards from people who may have them, including any authorized user cards, and put them in a safe place or destroy them.
3. Get multiple copies of the death certificate
You will ly need to get several official copies of this document to send to credit card companies and life insurance companies and for other estate purposes.
While the funeral director who handles the burial or cremation of your loved one can help you get copies of the death certificate, keep in mind that these official documents come with a per-copy cost, which varies by state and even the county where you live.
4. Notify credit card companies of the death
All credit card accounts should be closed immediately after the primary cardholder dies, and you should act quickly to avoid interest and finance charges. For joint credit cards, notify the credit card company that a joint cardholder has died.
Also, find out if any recurring charges are set up on each credit card account. If there are recurring charges, such as a phone bill or utility bill automatically charged to the account each month, you’ll need to cancel those or transfer them to another card right away.
When you contact each credit card company, do so by certified mail and save your receipt. If you call the number on the back of the card, you can speak to a representative about the situation; they can flag the account and provide the address where you’ll need to send the necessary documentation.
Once each card issuer receives your letter, they’ll ask for an official copy of the death certificate if you didn’t send one in your initial letter.
5. Contact the three credit bureaus
In addition to all credit card companies the deceased had an account with, you’ll also need to contact all three credit reporting agencies — Experian, Equifax and TransUnion — to request a credit freeze, preventing anyone from wrongfully accessing the account.
Then, you should again follow up by mail to request that the credit report be immediately flagged as “Deceased. Do Not Issue Credit.” Flagging the credit report as “deceased” prevents criminals from opening up new credit cards or other accounts using the name and Social Security number of the deceased.
The phone numbers for the credit bureaus are:
- Experian (888-397-3742)
- Equifax (800-685-1111)
- TransUnion (800-888-4213)
Depending on state law, you may also need to wait a specified period for bills to come in, and post a public notice of death in a newspaper before you start distributing money.
It’s essential to know your rights when dealing with debt collectors.
Remember, you’re protected by the federal Fair Debt Collection Practices Act (FDCPA), which makes it illegal for debt collectors to use abusive, unfair or deceptive practices when they collect debts.
Don’t let individual creditors try to jump ahead in line and get paid first — especially if there is not enough money to go around.
Before you pay anything, you should also ask the credit card company to submit a proof of claim for the estate, according to John Caleb Tabler of Lau & Associates in Pennsylvania. You can include this request with your written notification to the credit card company, or you can submit it later.
Some debt collectors are very aggressive, and they may try to prey on the survivor’s emotions to try to get them to pay a debt they may not owe. When reaching a deal with a debt collector, make sure you never admit or agree to anything on the phone, especially a payment plan.
If you need help determining the order of debts to be paid in your state or you need general legal advice while overseeing the final wishes of the deceased, you may want to seek out an estate attorney.
What Happens to Credit Card Debt When the Card Holder Dies?
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When Terry McDougall’s mother-in-law died, the Chicago-based executive coach’s family was contacted by debt collectors trying to get them to pay up to cover credit card debt left behind when she died.
They were “alarmed and worried” by the calls, which came while her family was still dealing with their grief and funeral plans, McDougall says.
Most Americans are feeling anxious about their financial situation, and 21% cited credit card debt as a cause according to a recent NextAdvisor survey. But what happens to this debt when someone dies?
McDougall says she and her husband had worked in financial services, and they “had an inkling” they weren’t responsible for paying the credit card debt and decided to do more research. Their hunch was confirmed.
Who Pays Your Credit Card Debt When You Die
Who pays for your credit card debt when you die and where the money comes from can depend on a few different factors. Estates, wills, and the state where you live all play a part.
In most states, the general answer to who pays your credit card debt when you die is your estate, which is everything you owned at the time of your death, according to Leslie Tayne, a debt-relief attorney with Tayne Law Group in New York. Another way to think of an estate is the sum of any assets, cash, and property a person leaves behind when they die.
Having an estate plan or will in place ensures your financial wishes will be carried out, including payment of debts and distribution of assets to inheritors.
You do not need to have a will or a formal estate plan in place to have an estate. Debt will still be paid the estate when someone dies without a will.
Having a will ensures that after debts are paid, your estate is distributed to specific individuals, or inheritors. A will can also name a specific person to be an executor over your estate, or someone whose duty it is to make sure all of the wishes laid forth in the will are executed. A probate court must accept any executor named in a will.
While credit card debt cannot be inherited by family members who survive you in death, it can impact how much of your estate is left to your inheritors, as debts will be paid the estate first.
Creditors will have a set amount of time after death in which they can file a claim against the estate, and this amount varies by state. Often the deceased have specifically stated in the will which debts will be paid by the estate. Otherwise,the executor can order debts to be paid, according to Tayne.
If your credit card debt is so large your estate cannot pay it out, “it basically ends there,” according to Ted Rossman, an industry analyst at CreditCards.com. In other words, the “credit card debt actually dies with that person.”
If someone dies without a will, family members can agree on who should become the executor of that estate. If a consensus cannot be reached, a probate court will decide, state law, who will become the executor.
There are exceptions. Some states are considered “community property” states, which means all assets acquired during marriage are considered shared by the married couple. In this case, if a spouse died and left debts unpaid, the surviving spouse would be responsible for paying them.
The states with community property law are Louisiana, Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico, and Wisconsin.
Other special cases arise with joint card holders and guarantors. When you get a credit card, you become the guarantor of the account – meaning you make a legal promise that the debt will be paid, according to Tayne. A common example of this is when someone has an authorized user on a credit card – the primary card holder is the guarantor and responsible for paying the debt.
Authorized users would not be obligated to pay the debt if a primary card holder, or guarantor, dies. “Nor would any heir of that card holder,” Tayne says. However, if an authorized user dies, the card holder is responsible for the debt accrued by the authorized user.
If Creditors Ask, Should You Pay?
Just because creditors call doesn’t mean you have to answer, Tayne says. If creditors contact you directly, you do not have to pay them. If they have a legitimate claim, they can file it formally with the estate lawyers. If they don’t or cannot be paid by the estate, surviving family members are not responsible to pay.
For adults whose parents die, “they’re not going to be held liable for a parent’s [credit card] debt,” Rossman says.
Even after her family learned it was not responsible for paying off the debt “there was still some bullying from collections agents,” McDougall says. “There were a lot of things we were dealing with and it wasn’t helpful to have people calling and harassing my husband and his brother.”
“What we generally tell people is unless there’s an estate, you’re not responsible,” Tayne says. “Send a death certificate and ask them to close the file.”
After doing their research the McDougall’s told the creditors “with confidence” that they knew the law and to leave them alone.
What Happens to Your Debts After You Die
Debts typically become the responsibility of your estate after you die. Your estate is everything you own at the time of your death. The process of paying your bills and distributing what’s left is called probate.
The executor of your estate — the person responsible for dealing with your will and estate after your death — uses your assets to pay off your debts.
This might include writing checks from a bank account or selling property to get the money. If there isn’t enough to cover your debts, creditors generally are luck.
But this also might mean that your debts eat up assets that you had hoped to leave to heirs.
And, in some cases, family members could be on the hook for your debt. Understanding how your debts can impact those you leave behind is an important part of estate planning.
Who can inherit your debt?
After you die, the following four parties could become responsible for your debts:
Joint owners or account holders.
Spouses in community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Community property from a marriage can be put toward debt obligations, but spouses aren't responsible for debts that predate the marriage.
People tasked with settling the estate’s debt who didn’t comply with probate laws.
What types of debt can be inherited?
Here are some common types of debt that might become someone else’s burden after you die:
Mortgages and home equity loans
If you’re the sole owner of both the property and the mortgage, your estate is responsible for paying back the loan. However, anyone who inherits the home may be subject to the debt if it’s passed directly to them. In that case, they can sell the home to repay the debt or assume ownership and continue making payments.
Alternatively, the executor might use the estate’s assets to pay off the loan before the home is passed to heirs, removing their burden of debt. It’s worth noting that when ownership of a mortgaged property is transferred, lenders can request proof that the new owner has the ability to repay the debt, and can even demand immediate repayment.
Federal guidelines exempt family members from these rules.
Co-signers on a mortgage are directly responsible for the debt, as they took out the loan with the deceased. Joint owners named on the deed who didn't co-sign the loan aren't automatically responsible for payments, but they may want to take over the debt to prevent the lender from repossessing the home.
Mortgage protection insurance can be used to repay home loans in the event of your death, but it's often expensive. If you have an heir who will assume ownership or inherit a home with a mortgage, talk to a financial advisor before proceeding.
Credit card debt
The outstanding balance on a credit card is a type of unsecured debt. This means that if the estate can’t pay the balance, the credit card company is luck. However, any joint account holders must settle unpaid bills as they are equally responsible for the loan.
People who are simply authorized users of a credit card aren't responsible for paying the balance. But spouses living in community property states may still be responsible as their debts are shared.
Car loans are typically paid your estate. But because they're a type of secured debt, if payment isn't received, the lender can repossess the car. If your estate can’t pay off the loan and your heirs want to keep the car, whoever inherits the vehicle can continue making payments.
Private student loans are a type of unsecured debt, which means lenders have no recourse if the estate doesn't have enough money to repay them. However, co-signers of private student loans taken out before Nov. 20, 2018, may be responsible for the remaining debt. In community property states, the spouse is responsible if the student loan debt was incurred during the marriage.
Some lenders of private student loans forgive the debt upon death, including Sallie Mae and Wells Fargo. All federal student loans are discharged upon your death. If a student’s parent has a federal PLUS loan, it’s discharged upon the death of either the parent or student.
What creditors can and can't take
Creditors typically can't go after certain assets your retirement accounts, living trusts or life insurance benefits to pay off debts. These assets go to the named beneficiaries and aren't part of the probate process that settles your estate.
You can use a life insurance policy to help family members cover debts that could pass to them, or to simply make sure they'll have money after you’re gone.
» MORE: Find the best term life insurance
One important note: If your policy’s life insurance beneficiaries are no longer living, the death benefit may pass to your estate and be subject to creditors. One way to avoid this is to keep your beneficiary information updated.
Under Federal Trade Commission rules, debt collectors can contact a deceased person's spouse, parent, guardian, executor or administrator to discuss the debt. But collectors can’t mislead family members into thinking they’re responsible for paying the debts if they’re not.
Your family members have the right to stop a debt collector from contacting them, but if they’re responsible for the debt, they’re still required to pay it back. Read more from the Federal Trade Commission.
» COMPARE: Life insurance quotes
What happens to credit card debt after death
You can’t take it with you, but do credit card bills follow you into the grave? Does that debt die with you? Or can it come back to haunt those left behind?
There’s no one-size-fits-all answer. A number of factors, including where you live and who applied for the card, can radically alter the situation.
Here’s the simple part: If the card was yours alone, with no joint account holders, the debt is yours alone, too.
When you die, your estate is responsible for paying off the balance. If the estate goes through probate, your administrator or executor will look at your assets and debts and, guided by law, determine in what order bills should be paid. Remaining assets will be distributed to heirs by following your will (if you have one), or state law (if you don’t).
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Sometimes, the credit card company loses
If the assets don’t cover the bills? “If there isn’t enough money, credit card companies would have to, as my students say, ‘suck it up,’ ” says Doug Rendleman, law professor at Washington and Lee University.
Creditors are notified that the estate is insolvent. They write off the bills, and often that’s the end of it. Children, friends, or relatives can’t inherit debt. A card company can’t legally force someone else to pay.
The most critical question in whether the living still bear responsibility for a dead person’s debt is: Was the account individual, or shared? If a spouse, family member, or business partner signed the card application as a co-signer (joint account holder), then that person will be held liable for the balance on that card, along with (or instead of) the estate.
If that second cardholder is merely an authorized user (didn’t sign the application, isn’t liable for bills and merely has charging privileges), then he or she isn’t responsible.
Changes in rules of engagement
Two changes in federal law have altered the rules of engagement for collection after death:
Community property complications
The question of who can inherit debt “gets a little more complicated in community property states,” says Michael R. Kerr, senior manager of U.S. government affairs at Enova International. Generally, assets accumulated during a marriage are considered joint property in community property states. But, in some cases, so are debts.
State that employ community property law
- Alaska (opt-in)
- New Mexico
States that employ community property laws: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Alaska also has community property laws, but only if spouses voluntarily enter into such a community property agreement. Not all community property states play by the same rules. “All states have variations,” says Rendleman.
So if your husband or wife has a separate card account and runs up debt, at death “it’s possible that debt could pass to the spouse,” says Kerr. But it isn’t always cut and dried. “I think there is case law going either way,” he says.
Bottom line: In community property states, “you have to ask more questions,” says Kerr.
What about the assets?
Not all assets go through probate. Some items, such as IRAs, 401(k)s, brokerage accounts, and insurance, typically pass to whomever you’ve named as a beneficiary, which is one good reason to keep those designations up to date. In many cases, those assets aren’t considered part of the estate.
Since these assets don’t go through probate, the executor can’t use them to pay estate bills. So can the credit card company go after the person who inherits?
With employer-based pension plan accounts, such as 401(k)s, the answer is no, says Bruce Wolk, co-author of “Pension and Employee Benefit Law” and law professor at the University of California-Davis. Since the plans are protected by federal law, that won’t vary by state.
Insurance also usually passes outside the estate, and in most cases it’s also safe from creditors, says John H. Langbein, Wolk’s co-author and professor of trust law at Yale Law School.
With IRAs, “it’s a state-by-state question,” Wolk says. “Although many states exempt IRAs from that kind of claim.
” wise, with other assets, such as a brokerage account or bank account, the answer may vary from state to state.
Many states allow a house to pass from one spouse to another after a death without letting creditors intervene; many have laws that protect the family home from creditors.
The question can get more complicated if the house is in just one name, or if it’s passing to a child, other family member or friend. If the home becomes an issue (or you’re just worried that it could), talk with an attorney to find out exactly what a creditor can and can’t do.
Hounded after death
After Patricia’s husband died with a $14,000 balance on one credit card, she started getting collection calls. Patricia, a widow living in Oregon, asked that her last name not be used.
For a few months, while the estate was being settled, she kept up payments. There wasn’t enough money in the estate to pay the entire bill. She learned that, as an authorized user, she wasn’t responsible for her husband’s credit card. So she stopped making payments. And that, she says, is when things got ugly.
Over the next 32 months, Patricia received regular calls from six different collection agencies. The card company also reported her to the credit bureaus for nonpayment. A letter to the Comptroller of the Currency, which regulates national banks, fixed her credit report. But the calls continued.
“They would send me letters and yell at me on the phone,” she says. Calls came at all hours, seven days a week.
She repeatedly asked the card company for proof that she was a co-signer on the account, she recalls. They assured her she was but refused to show her any documentation. Finally, she received a court summons: The company was suing.
Patricia hired an attorney, who drafted a letter explaining once again that she was only an authorized user. The creditor dropped the suit.
“They didn’t understand the hell they put me through,” Patricia says. But she learned something. “Don’t let them bully you,” she says. “Stand your ground. Make sure you get the facts. And challenge them.”
When collection calls come
If you start getting collection calls after a death, you need to determine three things: is that debt valid; is it within the statute of limitations (the time limit that creditors and collection agencies have to collect on a debt), and are you in any way liable for it? You also need to correctly handle collection calls.
Never rely solely on what the creditor or collections agent tells you.
They didn’t understand the hell they put me through. … Don’t let them bully you.
As host of a national consumer call-in show, Dave Ramsey has heard all kinds of stories. Some collectors “will say anything,” he says. “They’ll even lie to you and say you’re liable when you’re not. That doesn’t mean they can collect.”
Joe Ridout, consumer services manager for Consumer Action, a national advocacy group, has also gotten an earful from consumers. “There are some shockingly inventive things collection agencies will do to get someone to pay a bill they don’t owe,” he says.
Worried about what action a card company or collections agency could take? “Check with a lawyer,” says James P. Caher, attorney and co-author of a book about bankruptcy law. “Don’t pay them any money. Don’t believe them.”
What to do with accounts after a death
If a family member dies, the executor can notify the creditors. If you’re handling that duty yourself and creditors need to be contacted individually, gather the bills, call the card companies, and inform them the account holder has died. Find out where to send a certified copy of the death certificate.
Include a note with the deceased’s name and credit card account number. Keep a copy for your records, and mail it so that you have proof of when it was sent.
If representatives ask about payment, refer them to the executor.
Don’t promise anything until you know what assets and bills the estate has, and what your rights are.
Sometimes card companies, such as American Express, will offer to let you take over an account if you agree to assume the debt and can pass a credit check. If your credit isn’t as good, you may not inherit the same low interest rate or high credit limit; if you don’t want the account, close it.
After Laura’s mother-in-law died, the family discovered she had no credit card debt but quite a few credit accounts. “We were concerned that someone could start using the cards,” Laura says. She is a resident of Indiana who asked her name not be used.
They decided to close them. But even though Laura’s husband had a power-of-attorney for his mother’s affairs, “they wouldn’t talk to him,” she says. “They wanted it in writing. They wanted the paper.”
She says she had to send multiple notification letters and track who responded, who didn’t, which accounts were closed, and which remained active.
After a death, Laura says, “it’s just one more thing that’s a lot of work.”
See related: Handling collection calls for a dead person’s debt, State statutes of limitation for credit card debt, Stop paying your late mother’s credit card debt
The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.
Dealing with the debts of someone who has died
When someone dies and leaves debts, what happens to these debts depends on a number of things.
These include what kind of debt it was, if it was secured against anything, if there was a guarantor or insurance and if there are enough assets left in the estate.
Unless the surviving relatives are co-signers or guarantors of the loan, they will not be liable for paying off any debts their own pocket. This guide will help you find out what debts need to be repaid and what you need to do.
What happens to debts when you die?
When someone dies, their debts become a liability on their estate. The executor of the estate, or the administrator if no Will has been left, is responsible for paying any outstanding debts from the estate.
Find out more about sorting out someone’s estate when there is a will. What should you do if you’re sorting out an estate when there isn’t a will.
If there is insufficient money or assets in the estate to pay off all the debts, then the debts would be paid in priority order until the money or assets run out. Any remaining debts are ly to be written off.
If no estate is left, then there is no money to pay off the debts and the debts will usually die with them.
Surviving relatives will not usually be responsible for paying off any outstanding debts, unless they acted as a guarantor or are a co-signatory of the debt.
Who has to pay off the debts?
It is the responsibility of the executor or administrator to pay off the debts.
Being an executor does not mean you will be held personally liable for any debts of the estate. However, there are some exceptions and taking on the responsibility does come with some risks.
If it’s a large or complicated estate, you might want to consider seeking the advice of a solicitor or probate specialist.
Learn more about when to use a probate specialist. Find a solicitor or probate specialist on the Law Society website.
Sorting out the debts of someone who has died
The first step is to figure out what debts have been left and what kind of debts they are.
Go through papers and financial statements and make a list of everything owed.
You’ll need to check if there is a guarantor for any of these debts. If there is the guarantor remains liable for any debt covered by a guarantee if it’s not paid by the estate.
There’s a different way of dealing with and paying off the different kinds of debt. So, it’s important you find out what kind of debt it is.
Debts which are in the deceased name only can be paid the value of the estate. If they do not have enough assets to pay-off the debt, then the debts will be written off. Individual debts can be secured or unsecured.
Any surviving spouse, civil partner, or relative cannot be required to pay off individual debts their own pocket, unless they have provided a personal guarantee.
A personal credit card with an outstanding unpaid balance is an example of individual debt.
If two or more people have taken out a loan in all their names, in most situations the outstanding debt will pass in full to the surviving people who took out the loan.
A joint mortgage and a joint current account with an overdraft are examples of joint debt.
One thing you could do is check if there is an insurance policy to pay off the debt. If not, you could contact the creditor or lender to check the terms of the loan. If you think you might be unable to meet your payment obligations, explain your situation and see if you can negotiate a more affordable payment arrangement.
If a debt is secured against an item or asset, for example, a property, things are a little more complicated.
Before working out the value of an asset, your home, you must find out how it was owned and the value of the deceased’s share of the jointly owned asset.
If you’re joint tenants, where each person owns all the property, the deceased share of the property automatically passes to the other owner or owners. This means the property does not form part of the estate and cannot be considered when paying back outstanding debts.
The surviving owner will continue to be responsible for making the repayments on the loan as normal.
If you’re tenants in common, you only own a specific share of the property. This means, the deceased’s share of the property can be taken into account when paying back debts.
If the item securing the loan is not a property, similar rules apply. So, for example, if the asset is owned outright by two or more people, then it can’t be taken into account.
If it is only owned by the deceased, even if other people have use of it, then it can be used to pay off outstanding debts.
If you are not sure who the property is owned, you can find out from the Land Registry for a small fee for properties registered property in England and Wales. Some properties are not registered and if this is the case you will need to check the deeds.
Find out more about secured and unsecured borrowing.
An unsecured debt is not secured against your home or other asset, for example a car. Creditors trying to reclaim a debt cannot take these if you’re unable to pay off the debt.
You can still be pursued for these unpaid debts, but generally they will have to wait until the priority debts have been paid first.
There is more information about the order debts must be paid after death later on in this guide.
Occasionally, after all the debts are paid, you might find a debt you knew nothing about.
To help avoid this, you can advertise in a local newspaper before you start arranging to pay the debts.
This gives the deceased’s creditors time to come forward with any claims.
You aren’t under a legal obligation to place a Deceased Estates Notice, but if you fail to do so, you could put yourself at risk. This is because if you distribute the Estate and a creditor then comes forward, you could be found personally responsible. You might therefore have to pay the debt from you own pocket.
A period of at least two months should be allowed from the date of the advertisement for the submission of any potential claims on the estate.
How to pay off debts after death
There is a lot to do when you’re dealing with the debts and estate of a deceased.
Getting letters or phone calls from creditors demanding payment just adds to the stress of the situation. So, contact the creditors and let them know the person has died.
Tell them you’re going through the legal process of dealing with the person’s estate. You should also ask them for a letter or statement showing the outstanding balance on the debt. Once they know this, they should back off and give you time to sort out the estate and debts.
If it’s an individual debt, they should also stop taking out regular payments from the deceased’s bank account(s) until the debt is settled in full.
If it is a joint debt, then the name of the deceased can be removed from the debt.
Step 2: Check if there’s insurance
The next step is to check if the person took out any insurance to pay off the debt. For example, a life insurance to pay off the mortgage in case of death.
You should do this no matter what kind of debt it is.
If there is insurance
Check the terms of the policy for what you can claim. Some policies, such as payment protection insurance (PPI) usually only pay out for periods of unemployment or illness but not death. You can then contact the insurance company to make a claim. Once the claim is processed, you can use the money from the claim to pay off the debt.
In most cases the proceeds of a life insurance policy will go directly to a nominated beneficiary and will not form part of the estate. However, if no beneficiary has been nominated the proceeds of the life insurance policy might form part of the estate and could be used to pay off the outstanding debts. This will depend on the terms and conditions of the policy and how it was set up.
If there is no insurance
You’ll need to contact the creditors to make arrangements to pay off the debts if they haven’t already made a claim on the estate.
For joint debts:
- you should check the terms of the loan
- ask them to take out your deceased partner’s name from the bills and transfer all future bills to your sole name
- if you can’t afford to pay each instalment in full, see if you can renegotiate the repayments to an amount and schedule you can manage.
Find out what to do if you’re struggling to pay off debts after a death.
For individual debts:
- ask for a statement or letter showing the outstanding balance on the debt
- give them the name and contact details of the executor or administrator for the deceased’s estate. They’re responsible for making sure the debt is paid from the estate.
- if you’re the administrator of the estate, you’ll need to have probate or a grant of administration
- the executor will pay the debts off in priority order.
Step 3: Pay in priority order
Before any of the debts are paid, you are first allowed to cover any funeral expenses and the costs involved in the administration of the estate.
Once you have probate or grant of administration, you can use the money in the estate to pay off the debts not covered by insurance. This is more important than distributing the estate to any heirs.
The debts are paid in a specific order:
- Secured debts, such as mortgage repayments
- Priority debts, income tax and council tax
- Unsecured debts, including utility bills and credit cards
If there is not enough money in the estate to pay off all the debts, the most important are paid off first.
If there are assets, such as a car or house which could go towards paying off the debts if sold, it’s an option worth considering.
If there are more debts than the estate can pay back, this is called an ‘insolvent estate’.
What do I do if I’m struggling to pay off debts after a death?
Most people who have got debt advice tell us they feel less stressed or anxious and more in control of their life again.
If you’re struggling to pay off joint debts after your partner dies, or if the drop in income makes it hard to pay your own debts, it can be hard to know where to turn.
It’s important to know you don’t need to struggle on alone with your debt worries.
There are many ways to manage your debts and some are more well known than others.
The best one for you will depend on your personal circumstances.
It’s always best to talk things through with an experienced free debt adviser before you make a decision about what to do.
How will a debt adviser help you?
A debt adviser will:
- never judge you or make you feel bad about your situation
- suggest ways to deal with debts you might not know about
- always be happy to talk to you, however big or small your problem might be
- find ways to manage your debts even if you think you have no spare money
- check you have applied for all the benefits and entitlements available to you.
You can contact an adviser in the best way for you:
- over the phone.
Find out where to Get free debt advice now.