Repayment of loan upon death?

Fatfish_2

Hi folks - I've posted this already in the loans thread, but someone over there suggested I try posting in here for a greater response. So while this is my first post, it's actually my second!

I've searched the forum but not found what I'm looking for. It's regarding unsecured loans and the banks right to chase next of kin for payment in the event of the borrowers death.

I have an existing loan with Cahoot and I approached them yesterday about getting an unsecured personal consolidation loan. Looking at the Payment Protection Insurance (PPI), I noticed that it increased my payments by £42 per month on top of the loan repayment! Something I'd rather avoid obviously.

When I enquired with Cahoot customer service as to whether the lender could chase payment from my next of kin in the event of my death (if I didn't take out PPI), the customer service advisor confidently replied that yes they could and would.

I took no further action and decided to call back later once I'd thought about it. In the meantime, I called the Consumer Credit Counselling Service (charitable body setup to offer help and advice). They advised me that the bank wasn't allowed to chase my next of kin for payment and that it would be written off!

When I called back and spoke to a second advisor, they also confirmed that the bank couldn't chase my next of kin should the worst happen and that the debt would be written off.

As I'd received conflicting replies, I asked to speak to a manager. The manager called back about an hour later and after explaining the situation to her, she catagorically told me that yes they could chase for payment, but it's rare that they do. She told me it's entirely at the discretion of the bank/lender. She said that their parent company (Abbey National) would normally chase for payment in this instance, but that Cahoot 'probably' wouldn't, but couldn't say for certain?!

She really wasn't very helpful and was obviously annoyed at my query! Too much hassle for her I think.

However, she did put me on hold and told me she'd check with their legal department. After 5 minutes of holding, she came back to say yes they definately could chase for payment (baring in mind nobody was given as a guarantor and the loan was taken out solely in my name!) and that banking legislation gave them the right to do so. However, she had absolutely no idea what legislation permitted this and told me to contact the FSA.

I have emailed the FSA and am awaiting a response - but was wondering if anyone here knew the answer or could point me in the direction of the legislation that gives the bank this right? If there is such a thing!

It's been suggested in the loans thread that the bank would persue my estate to reclaim what's owed - considering I'm not a home owner and I have very few possesions, they're welcome to it!

Sorry for the long post - I know it's a bit much, but thought I'd best give all the deatails. Thanks very much in advance for any help or advice!

Floss

Do you have life insurance? maybe through your employer's pension scheme? any ISA's? All things like that will make up your estate, not just your personal possessions and any assets such as property.

CLAPTON

The situation is as follows:

Assuming the debt(s) are in your sole name.

After someoine dies, all their debts must be settled from their estate.
Their estate is essentially any of their assets at the time of death e.g. your bank account (if positive of course), value of car, any personal effects (those oil painting for example), any money from insurance policies unless written in trust.
The estate will be liable for any of your debts. If there is insufficient money in the estate then the debts die. They can't chase any of your relatives, parent, sibling anybody at all.

So when they say they will chase for their money , they are correct because they can chase the estate but they can't chase your relatives...

OK

bargainbetty

Clapton has it spot on - your estate can have a lien put against it, but no individual can be chased unless they have signed as a guarantor. Your family are safe from any kind of legal action. Once you die, so does the debt.

I think some of the lenders imply that if you take out PPI it would be 'safer' for your family should anything happen, but frankly they won't pay out for at least 60 days if you get sick, lose your job or have a child, and even then they try to avoid it as much as possible. Some don't even cover death! You'd be better off getting some type of life assurance policy (I found one through this site's link for £5.60 per month).

Just a thought, but before you consolidate (DFW's everywhere are spitting at the word) have you posted an SOA on here to see if anyone could help you bring your expenditure down to manageable levels first?

We're kind of obsessive about helping people avoid more debt in the first place here..... and consolidating might lower the monthly, but it just extends the years.

Good luck, whatever you decide to do!

Fatfish_2

Thankfully (or not!), my estate comprises 2 overdrawn bank accounts, 2 credit cards (not maxed, but close!), an old PC, my pride and joy acoustic guitar and my £300 trusty steed - a 1990 Renault rust bucket with 130k miles! No pensions, savings or insurance policies.

So I guess the debt woud die with me then once they've sold whatever's left. Thanks for the advice folks.

As I'm new here, terms like SOA and DFW's are lost on me I'm afraid! Any chance you could clarify or point me in the right direction?

My current expenditure has reduced quite a bit in the last year. I go out very rarely and save what I can for a cheap holiday with my partner once a year - to be honest, if it wasn't for her I'd probably still be out partying all the time and running myeslf in to debt. She really is an angel. :A

My current expenditure each month is only the basics (rent, food, bills) plus £25 for my mobile phone, £14.00 for AA cover and £15 for contact lenses (essential). Apart from that, the only other outgoings I have are my current loan repayments (£200/month including £20 PPI - wish I'd looked in to that one before!) and paying off the basic interest on my CC's and overdrafts. My salary clears one of the overdraft's each month, but always eats back in to it quite heavily just because I'm not on a great salary - £17k.

I'm not sure there's much more I could cut back on - saying that, I do probably need to lose some weight!

Thanks again for all your advice - it's much appreciated.

CLAPTON

an SoA is a statement of affairs. basically you list your income and all the details of your spending and the details of your debts.

its often surprising what suggestions people can make for reducing your spending. It also helps you to see where all your spending actually goes rather than perhaps where you think it is going.

you may wish to read this post for further details
http://forums.moneysavingexpert.com/showthread.html?t=107280

also its useful just to say alittle about your situation...mortgage..living with OH, any children etc

PS DFW stands for debt free wannabee.

Fatfish_2

Ah, right - thanks. I'll take a proper look when I get home tonight. Sounds like a good idea - certainly can't hurt!

kessik

Fatfish,
Most banks won't chase your relatives for payments of any kind but I need to tell you all this story. My sister was killed aged 21 - no husband, no children, rented a flat from the council, no job: basically no assets at all. She had a loan with LLoyds who, when the police told them of her death, immediately wiped the debt. Rachel, my sis, had £600 on her Capital One credit card. Despite the police contacting C1 they chased Rachels' boyfriend and our parents for the £600 even though they weren't guarantors for the card; wrote and rang our parents asking if they'd like to pay; continued to send offers for more loans/cards/credit etc to Rachel at our parents even though she'd not lived there whilst she had the card (God knows how they got our folks' address). My mum and dad had to write to Tony Hetherington at the Mail on Sunday TWICE where he named and shamed C1. We never got an apology despite C1 telling the Mail they would apologise. They are just a bunch of (fill in your own insult) and anything that comes to this house from them is used for cleaning the toilet.

Bossyboots

This has come up several times recently but it is not always easy to navigate here using the search facility.

It is correct that the creditors cannot recover paymentof the debts from the next of kin but as kessik has shown, sometimes they will try. From some posts here, they occasionally get lucky and some who didn't realise they didn't need to pay ended up doing so. This is why they try it on, for the times when people pay up.

It is not a true statement that debts die with you. The debt remains the sole responsibility of the person who signed the agreement. If it ever came to light that there was money (for example) owned by the deceased but unknown to the next of kin for some time, those debts would still have first call on that asset.

mountainofdebt

kessik wrote:

Fatfish,
Most banks won't chase your relatives for payments of any kind but I need to tell you all this story. My sister was killed aged 21 - no husband, no children, rented a flat from the council, no job: basically no assets at all. She had a loan with LLoyds who, when the police told them of her death, immediately wiped the debt. Rachel, my sis, had £600 on her Capital One credit card. Despite the police contacting C1 they chased Rachels' boyfriend and our parents for the £600 even though they weren't guarantors for the card; wrote and rang our parents asking if they'd like to pay; continued to send offers for more loans/cards/credit etc to Rachel at our parents even though she'd not lived there whilst she had the card (God knows how they got our folks' address). My mum and dad had to write to Tony Hetherington at the Mail on Sunday TWICE where he named and shamed C1. We never got an apology despite C1 telling the Mail they would apologise. They are just a bunch of (fill in your own insult) and anything that comes to this house from them is used for cleaning the toilet.

Oh kessik I remember reading this story in the MOS - it just defies belief doesn't it that some people don't have the common sense they were born with and to not apologise is down right disgraceful.

kessik

mountainofdebt wrote:

Oh kessik I remember reading this story in the MOS - it just defies belief doesn't it that some people don't have the common sense they were born with and to not apologise is down right disgraceful.

Then you'll remember all the crocodile tears claptrap Capital One came out with at the time. We never had a single word from them although the letters and offers of cards stopped the second time they were in the MOS. Anyway, as you can imagine Capital One is a dirty word in this house.

kessik