Dealing with the debts of someone who has died
Losing a loved one is always a challenging time. When it comes to grieving, money and finances are probably the last things on your mind. Unfortunately, it is very common for unpaid debts to be left by the deceased. It is important not leave the finance side of things for too long. Debts are renowned for getting out of hand, so being aware of what exactly you owe will be a weight off your mind later on.
The best way forward is to start going through the deceased’s papers and statements. Making a list of everything owed will be helpful when trying to resolve each one. Whether or not these debts will be paid from the deceased’s funds or assets will depend on whether the debts were owed by the deceased and another person jointly.
A joint debt is where two or more people are responsible for the full debt. All of the names should be on the credit agreement of the mortgage. It is common practice for the survivor of the joint debtors to be entirely responsible for the payment of any outstanding debt. You should always check the terms of the agreement to make sure that this is the case. An individual debt, however, is a debt solely owned by one person alone and has been taken out in their name only.
It is important to establish whether the outstanding debts are joint or individual. If you have joint debt then the paperwork might state the survivor is responsible for the outstanding debt. It is imperative you notify them of the death. At this point, they should be able to send you a letter showing the outstanding balance of the debt.
Make sure you check whether there is any insurance that covers the debt. Mortgages, for example, commonly encourage life insurance that will clear the debt if either person dies. Payment protection insurance (PPI) is often used to pay off a personal loan or credit card when someone is unable to work due to illness. It’s worth checking with the lender if your PPI policy includes life cover that will pay out in the event of the death of the borrower. Checking the terms of any insurance policy purchased may help you pay off debt quicker.
If you do have joint debts with someone who has recently died and it cannot be paid off by insurance, you should always contact the lender. This could be a bank, mortgage Company or credit card company. Ask them to check the terms of the loan, and if needs be, ask them to transfer all future bills to your sole name.
Double checking that any regular repayments are not coming out of a bank account in the deceased’s sole name as any such account will now be frozen.
You may feel overwhelmed with any new influx of debt and have problems meeting repayments. Talk or write to the lender and explain your situation. You might be able to renegotiate the repayments or temporarily freeze the interest.
It can be a stressful and upsetting time, but time is of the essence in these situations. If you feel confused about how to deal with a loved one’s debts, then get in contact with CTA CIC. We can give you free, independent advice about how best to deal with the process. Speak to one of our friendly, personable staff today to start getting any finances on track.