A deceased person's credit card debt

chattychappy

!!!!!! wrote: »

At death any money in a joint acc passes to the surviving account holder and DOES NOT form part of the deceased's estate. I don't believe that the banks can claim that the CC debt be paid from the joint account.

Technically at point of death the account ceases to be a joint account.

Unfortunately that is only part of the story. The estate is indeed deprived of the bank account (or share of house etc). It won't pass by Will or rules of intestacy. Executors/administrators will have nothing to do with it.

The position was upheld by the Court of Appeal in Re Palmer [1994] Ch 316. [that in particular creditors had no claim]

The government felt that this was undesirable - why should certain debts be avoided at death merely because someone inherits via joint tenancy rules rather than by Will.

So they created an exception in respect of insolvent estates. s 12 of the Insolvency Act 2000 amends the Insolvency Act 1986 by inserting s421A.

The effect is that a court can require the property passed by survivorship to be used to "make good" the deficit in the estate.

This is a specialist area of law - the OP should seek legal advice and of course if that's paid for advice it might amount to more than the money involved! There must, however, be an insolvency administration order before they can require the money to be paid over. They have 5 years from the date of death. This is expensive for the bank too - so hopefully there is room for a deal, or they will just drop it.

Where is the current account held? Despite my earlier advice, if it is with the same bank as the credit cards in question or there is a direct debit in place, I would be tempted to move it. But I wouldn't spend it for now. If it's not moved and the bank take it (I sincerely hope they would know better) then it should be possible to get it back.

In the absence of getting legal advice I would suggest that an account of the estate is provided as requested (include all assets and liabilities). Exclude the joint account but add a comment as to its existence and that it has passed under survivorship and is not part of the estate. Ask them to confirm that this settles the matter and if they wish to take it further then you would prefer this to be in writing during this upsetting time.

It's then over to them to get the required court order if that's what they want to do.

[There is an explanatory note at paragraph 12. http://www.opsi.gov.uk/acts/acts2000/en/ukpgaen_20000039_en_1 The provision really was intended to catch bigger assets that pass by survivorship - eg matrimonial homes, but it covers all property passed this way.][URL="http://www.opsi.gov.uk/acts/acts2000/en/ukpgaen_20000039_en_1]"]
[/URL]

moonrakerz

I don't wish to sound mean spirited here - but.....

"Widow being hounded by bank for money" - How the Daily Mail headline would read.

However as Freddy only passed away " a few days ago" the bank is unlikely to be "legally hounding" anyone at this stage !!

If the cards were in his sole name (as it now appears they were) his widow has no worries - if she starts trying to remove/hide assets which may not be hers in the first place she is treading very dangerously.

Is there a Will ? this may complicate matters more, especially if there wasn't.

chattychappy has sumarised the position very well

There seems to be a school of thought that having accumulated a debt it is now fair game to try and avoid paying what is owed.
Why did the global financial crisis happen ? because of huge debts that had built up, then couldn't/wouldn't be paid off !
Who is paying for that now - ALL of us !

I pay my credit card bill, I do not wish to pay every one else's as well !

System

chattychappy wrote: »

So they created an exception in respect of insolvent estates. s 12 of the Insolvency Act 2000 amends the Insolvency Act 1986 by inserting s421A.

The effect is that a court can require the property passed by survivorship to be used to "make good" the deficit in the estate.

This is a specialist area of law - the OP should seek legal advice and of course if that's paid for advice it might amount to more than the money involved! There must, however, be an insolvency administration order before they can require the money to be paid over. They have 5 years from the date of death. This is expensive for the bank too - so hopefully there is room for a deal, or they will just drop it.

Where is the current account held? Despite my earlier advice, if it is with the same bank as the credit cards in question or there is a direct debit in place, I would be tempted to move it. But I wouldn't spend it for now. If it's not moved and the bank take it (I sincerely hope they would know better) then it should be possible to get it back.

In the absence of getting legal advice I would suggest that an account of the estate is provided as requested (include all assets and liabilities). Exclude the joint account but add a comment as to its existence and that it has passed under survivorship and is not part of the estate. Ask them to confirm that this settles the matter and if they wish to take it further then you would prefer this to be in writing during this upsetting time.

It's then over to them to get the required court order if that's what they want to do.

[There is an explanatory note at paragraph 12. http://www.opsi.gov.uk/acts/acts2000/en/ukpgaen_20000039_en_1 The provision really was intended to catch bigger assets that pass by survivorship - eg matrimonial homes, but it covers all property passed this way.][URL="http://www.opsi.gov.uk/acts/acts2000/en/ukpgaen_20000039_en_1]"]
[/URL]

The explanatory notes are talking about somebody made insolvent before death

12. The order-making power contained in Section 421 of the Insolvency Act 1986 is not sufficient to ensure that all property, the ownership of which was vested in a deceased insolvent immediately prior to his death (including his share in property held on a joint tenancy), is available to his creditors in insolvency proceedings where the insolvency order was made after the deceased insolvent's death1. That means that in some instances, what may appear to be the main, if not the only asset, namely the debtor's interest in the matrimonial home, will be beyond the reach of his creditors. The Act therefore provides, by way of new Section 421A to the Insolvency Act, that the value of any interest in jointly-owned property, lost to the deceased insolvent's estate by the operation of the survivorship rules, is to be recoverable for the benefit of that estate and, therefore, for the creditors of the deceased insolvent.

1. This was established by the decision of the Court of Appeal in the case of In re Palmer Deceased (A Debtor) 1994 Ch. 316.

The deceased was not insolvent and the question of property never arose in the original question. It was asking about the money in the joint account.

chattychappy

!!!!!! wrote: »

The explanatory notes are talking about somebody made insolvent before death

No, "The order-making power contained in Section 421 of the Insolvency Act 1986 is not sufficient to ensure that all property, the ownership of which was vested in a deceased insolvent immediately prior to his death (including his share in property held on a joint tenancy), is available to his creditors in insolvency proceedings where the insolvency order was made after the deceased insolvent's death"

So it identifies the situation where an insolvency order is making AFTER death. Of course that is the explanation, it's not authoritative. s421A was designed to prevent property lost to creditors because it passes by survivorship. It unhelpfully refers to "deceased insolvent" - but note that the act doesn't require insolvency to be established prior to death (though it may be if there was an Order made).

s421A is very clear on this - it refers to "insolvent estates". As I say, note there is no reference to the insolvency (or not) of the person prior to death. An insolvent estate is what we have in the OP's situation and s421A deals with that:

421A Insolvent estates: joint tenancies

(1) This section applies where—
(a) an insolvency administration order has been made in respect of the insolvent estate of a deceased person,
(b) the petition for the order was presented after the commencement of this section and within the period of five years beginning with the day on which he died, and
(c) immediately before his death he was beneficially entitled to an interest in any property as joint tenant.

!!!!!! wrote: »

question of property never arose in the original question. It was asking about the money in the joint account.

The money in the joint account is "property". (Holders of joint accounts are "joint tenants" in that property.)

jonesMUFCforever

Fact 3 credit card accounts with an insolvent estate - Fact bank has to write off debt - Fact widow is under no legal obligation to repay money from joint account.

System

From the banks point of view they have to first get the estate declared insolvent and then they would only entitled to 'value lost to the estate'.

Value lost to the estate is only the amount they would have got if the deceased had been declared bankrupt before death - in this case very little.

By the time they have paid their legal people to get the estate declared insolvent they have probably spent more than they are owed.

chattychappy

jonesMUFCforever wrote: »

Fact 3 credit card accounts with an insolvent estate - Fact bank has to write off debt - Fact widow is under no legal obligation to repay money from joint account.

Fact - you seem to have ignored the legislation in force.

!!!!!! wrote: »

From the banks point of view they have to first get the estate declared insolvent and then they would only entitled to 'value lost to the estate'.

Value lost to the estate is only the amount they would have got if the deceased had been declared bankrupt before death - in this case very little.

By the time they have paid their legal people to get the estate declared insolvent they have probably spent more than they are owed.

Yes - probably no more than £1500 (half the balance) would be available. Also the court has discretion s421A ss3-4:

the court must have regard to all the circumstances .. including the interests of the ... survivor; but, unless the circumstances are exceptional, the court must assume that the interests of the deceased’s creditors outweigh all other considerations....The order may be made on such terms and conditions as the court thinks fit.

Hopefully the banks would not think it worth pursuing this any further.