When someone dies in debt, it can be hard to know what to do with their unpaid debt. Here is a little breakdown of what you can do to deal with the debts of someone that’s died.
Tell Creditors That the Person Is Dead
The first thing you want to do when dealing with the estate of the deceased is to inform the creditors to let them know that the named debtor is dead. This should put an end to any creditors demanding payment. When you contact them, you should let them know that you are dealing with the estate as the executor and ask them to send you a statement with the outstanding balance due. This will not only keep the creditors off your back whilst you deal with the estate, but give you an accurate idea about what needs to be paid out of the estate.
If it is a joint debt, the creditors can remove the name of the deceased party from the debt.
Check on Any Insurance Policies
You are looking for things like life insurance policies that are put in place to pay off the mortgage in case of death. Even if there is no mortgage to pay, you should check for insurance policies to help with any debt that has been left behind.
If There Is an Insurance Policy
Carefully read through any policy that you find and see what, if anything, can be claimed from the policies. If you are able to make a claim, then you need to contact the insurance company to do so. When the money has been processed from the claim, you can then use the money to pay off the debt. Most payments from life insurance policies will go to the beneficiary, and it will not form part of the estate. If there is no beneficiary, then the policy can be considered part of the estate and then used for debt repayment. This will depend on what kind of insurance policies there are and what the terms and conditions are.
Struggling to Pay Debts After Death
When struggling to pay debts out of an estate, there is a specific order that debts must be paid in. The executor is responsible for finding any and all creditors that the deceased may have. The executor is also responsible for ensuring that the debts are paid out of the estate.
The priority order for paying the debts of the deceased is as follows:
- Secured Debts, e.g. Mortgage Repayments
- Priority Debts, e.g. Council Tax or Income Tax
- Unsecured Debts, e.g. utility bills or credit cards
Debts must be cleared before the estate can be divided amongst any of the beneficiaries. This includes selling any assets the estate may have in order to clear the debts. If there are more debts than can be repaid from the estate, it is known as an insolvent estate.
If you are struggling to pay off debts and need some advice, call our experts now. We can help you get things in order and take the stress out of dealing with the debts of the estate. Get in touch with us today.
