What happens to debt if someone dies?

When we die, some unpaid bills go with us – but not all, explains Paul Lewis

Older couple sat at home looking at laptop

When someone dies, the person who winds up their affairs – the executor if there is a will, or the administrator if there is not – has the job of assessing all their money, possessions and property. They then use that to pay any debts owed by the deceased. If there is a balance left, it is distributed to the heirs. But if there is not enough money in the estate to pay the debts, then the unpaid ones die too.

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Of course, things are not always that simple. If the deceased has a joint loan or mortgage, for example with a spouse or relative, then that person becomes liable for the whole debt. The same is true if a friend or relative acted as a guarantor for a loan. If the debt cannot be paid out of the estate, then the person who acted as guarantor will be liable.

However, if the deceased had a credit card and a spouse or other person also had a card on that account, that joint user is not liable for any debt left on the card. That is paid out of the estate, if there is enough to do so.

If the deceased had a spouse or civil partner and owned a home or a bank account jointly with them, then the property and money passes to the spouse or civil partner through what is called “survivorship”. Creditors find it very difficult to recover any debts from that and any such claim should be resisted.  Creditors can normally only recover debts from parts of the estate that were not jointly owned.

If the deceased had a state pension, then it is important to tell the Department for Work and Pensions (DWP) about the death.  That can usually be done through a
system called Tell Us Once.  However, the DWP acts slowly and very often one or two payments are made after the date of death. The DWP will try to recover the debt from relatives, but it does not have the right to do so. If the deceased owed money to the DWP before they died, then it can recover that from the estate, but not from a spouse or relatives.

Paul Lewis presents Money Box on Radio 4

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