After a person’s death, it can be difficult to address such stressful matters such as debts or liabilities, especially if the death is unexpected. Most people do not want to think about the procedures related to dealing with debts and how to make the repayments.
It is a common misconception that when a person dies, that their debts are wiped out, however this is not true and the debts can continue well after a person has passed.
Dealing with a person’s assets and debts after they die
The executor named by the will or administrator of the estate (if there is no will) will have to first evaluate all the assets of the deceased. Once the estate is established, the debts are paid out of the account.
What if the debts cannot be covered by the deceased’s estate?
If there is not enough money in the estate, then the bills have to be paid out in the following order of importance:
1. Mortgage payments
2. Rent payments
3. Water bills
4. Council tax
7. Credit cards
The beneficiaries can only recover what is left of the estate after all the outstanding bills have been paid off first.
Who else has to pay the debts?
Unless, the original agreement stated that another person has to pay the debts (e.g. joint tenancy or guarantee agreement), no-one else is required to pay.
However, if the estate does not cover the outstanding costs related to a jointly-owned property, the creditors may require you to sell the property to cover these payments.
Debts owed to the deceased
It would be up to the executor’s judgement when it comes to money owned to the deceased.
In cases where there is a clear, written agreement or proof of receipt – it is fairly straightforward when it comes to reclaiming the debts. If however, the debt was done on a casual basis without any written documentation, then it can be very difficult to prove and unlikely to be recovered.