Debts after a Death

Where there are joint debts, these will likely pass to the surviving co-debtor/s, who will become fully responsible for the debt moving forward. Examples include a joint mortgage or an overdraft on a joint bank account.

While this will not generally be of any concern for the personal representative who is managing the estate, it may be of considerable concern to the joint owner of the debt, who may not be able to pay the larger amounts owed as an individual, depending on their personal circumstances. In some cases, the personal representative and the co-owner of the debt will be the same person. If this applies to you, you must carefully keep the paperwork separate for the two things. Do speak with the loan or mortgage provider as soon as possible if you are worried about being able to make the necessary payments. It may be possible to re-negotiate the loan/mortgage. Read the terms and conditions carefully. However, the exact nature of any joint debt must be clarified, and the paperwork must be fully understood.

It is the job of the personal representative/s to make sure they pay all the debts they can out of the deceased person’s estate using the deceased’s assets.

They are not liable to pay off all debts where there is not enough money or assets in the estate to cover them. However, they must pay off debts in a strict order of priority to prevent them from being personally responsible for paying off any or all other debts with their own money.

One of the first jobs of the personal representative is to find out about all the debts of the person who has died, as well as the value of all assets as of the date of death.

This confirms if there is sufficient money or assets to pay any or all of the debts due and distribute the estate according to the Will or Intestacy or whether there is no estate for them to distribute.

If the person has died with limited assets, they might be insolvent, leaving it unable to pay the debts either in full or in part.

How can Personal Representatives protect themselves?

The personal representative must write to each known creditor as well as possible creditors to find out the extent of the debts and whether or not they will enforce them. Sometimes creditors will simply write off debts, but you can never assume they will. However, it is vital to also find out about unknown creditors and claimants against the estate for the personal protection of the personal representatives.

To fully protect their personal position, the personal representative should advertise any unknown outstanding debts in both the London Gazette and also the locality where the person used to live and wherever he or she owned any property. This can be done immediately after the death if executors are appointed and acting under a valid Will, but only after the issue of the Grant if there is no valid Will and administrators are acting.

Only once the time limit required to advertise has expired and all reasonable attempts made to find out about all debts, will the personal representative be free to work out what sort of debts are due and the total amount owing.

Great care needs to be taken NOT to pay off bills and debts too early as there is a strict order as to payment of debts as each is classified into a different priority. Further, unless the value of all assets is known, then the personal representative cannot work out if there is enough to pay any or all of the debts due.