When someone passes away, their debts don’t necessarily become discharged automatically, which can be extremely worrying if you are the deceased’s surviving spouse. So, who does have to pay the debts?
Applying for Confirmation
When dealing with a deceased’s estate, you may have been told that you need to obtain ‘confirmation’ before any money and other property, belonging to the deceased, can be released. It is often a bank, building society or insurance company that will ask for this.
‘Confirmation’ is a legal document from the court giving the executor(s) authority to uplift any money or other property belonging to a deceased person from the holder (such as the bank), and to administer and distribute it according to law. An application is lodged with the sheriff court.
If you think you will need help with debt in Scotland that was held jointly between you and the deceased, there may be some insurance to settle the debt, such as with a mortgage. In the event that there are no insurances, you should contact the lender and ask them to check the terms of the loan and, if necessary, transfer all future bills to your sole name.
In the case of individual debts in the name of the deceased only, contact the lender to notify them of the death.
Some PPI (personal protection insurance) policies include life cover which will pay out in the event of the death of the borrower, so it’s worth checking the terms of such insurances with the lender. Sometimes credit cards are covered by an element of PPI, so always check to see if life insurance is included.
If the estate is insolvent and the value is insufficient to settle all the debts owed by the deceased, you must settle what debts you can in the following order of priority:
• Secured debts, such as mortgages and secured loans
• Funeral costs and estate administration fees
• Unsecured debts, such as personal loans, utility bills, rent and other taxes.
What To Do If You’re Getting Demand Letters
It’s not uncommon to receive demands and requests for payment from credit card companies and lenders even after you’ve informed them that the debtor is deceased. This is usually due to delays in updating computer records.
Make sure you have informed interested parties of the person’s death and let them know that you are in the process of dealing with the estate.
Dealing with the financial affairs of a close relative who has died is never easy. If you are unsure how to proceed with settling the debts of a deceased, contact us for advice.