Many believe one’s debt is forgiven when they die. More importantly for our purposes, do their beneficiaries? In general, the rules for handling the debts of those who have passed are fairly simple, but there are a couple of wrinkles that you should be aware of.
Generally speaking, the debts of the deceased must be paid, and are paid by the estate of the person who has died. If there isn’t enough money in the estate to pay those debts, then they simply go unpaid, and family members are legally protected from having to settle them themselves. However, as always, there are some exceptions. You may be responsible for the debt if you:
- Co-signed on a credit agreement, such as a car loan
- Have a joint account with an overdraft
- If you lived with someone who died and there are outstanding bills such as utility or council tax bills
- If creditors were not informed that they could claim outstanding amounts against the estate. They should be informed either directly or by a notice in The Gazette – the official record of legal notices. Otherwise, creditors can pursue the estate for outstanding debts even after the estate is distributed.
The person in charge of settling the deceased’s debts is the one the Will specifies to carry out their wishes—the executor. If there’s no Will, only the closest living relative can apply to become the administrator. Once the court issues a letter of administration, the estate can be distributed according to law and the rules of intestacy.
As you may be aware, most of the larger creditors and debt purchasers outsource the management and collection of debts owed by deceased consumers to third-party debt collection agencies. The law protects people—including family members like you—from creditors or debt collectors who use abusive, unfair, or deceptive practices to try to collect a debt.
Creditors or collectors can contact any person with the authorisation to pay debts using the assets from the deceased person’s estate, typically the executor. Creditors and debt collectors may not discuss the debts of a deceased person with anyone else. But you do not have to pay them unless the debts fall under any of the conditions described above.
Though they are allowed to contact you, there are limits and you can request that they stop. To stop a creditor or collection company from contacting you, send a request in writing asking them to stop. A telephone call isn’t enough. Tell the collector you don’t want them to contact you again. Make a copy of the letter for your files, send the original by recorded delivery.
If you have problems with aggressive debt collectors you should:
- report them to a trade association (The Credit Services Association) or professional body with a code of practice the collector may belong to
- contact the Citizens Advice consumer service for help and advice
