What Happens to Debt When You Die?

From funeral costs to making sure your family is looked after, there are a lot of things to think about before you die. As a result, of all the subjects, the money and debt you owe might just be temporarily pushed to one side.

Mention the topic though and, chances are, you might think about Dickensian scenes of children having to repay their parent’s debts. The good news is it’s nothing like that. However, your creditors may still take what’s owed after your death.

Fortunately, you can do something about it.

Does debt die with you?

Although it’s reasonable to assume debt dies with you, this is not the case. As a spokesperson for the Money Advice Service commented:

"Technically speaking, if you pass away, it is the responsibility of your estate to pay any debts. If you have no estate, or the estate isn't sufficient to cover all liabilities, they get written off and creditors cannot chase surviving family members, no matter how big the debt. However, there are some exceptions."

These exceptions usually include joint debts and guarantor arrangements. In the case of the former, the other person included in the agreement would usually be liable to repay what’s owed. For example, if a deceased took out a mortgage with their partner, their spouse may now be liable to continue making payments.

It’s a similar situation with guarantor loans. If the original account holder passes, the guarantor would now be responsible to fulfill the agreement.

Of course, there are exceptions to every rule and lenders will probably be happy to renegotiate an arrangement in the event of death. Still, this is up to the provider’s discretion.

It’s best to resolve debt before death

According to Age UK, approximately 20% of people over 60 owe money on debts such as mortgages, credit cards, and loans. If you’re in a similar situation, and struggling to make repayments, then it might be time to resolve the situation through such debt solutions as an IVA.

Using this agreement, you could get on top of your finances in less than six years. Ultimately though, it’ll mean that anything you choose to leave behind goes to your family – instead of a creditor looking to claim what’s owed.

To find out more information, get in touch today. Our specialist team is no stranger to people such as yourself and we’d be happy to advise on the best possible solution for you.