Handing the keys back to the lender

Poppies123

Please help I could really do with some advise. My sister unfortunately died in early summer this year. She was very much in debt and had a debt management plan, which has been closed and most of the lenders have written advising they have closed the debt (except for a couple that have advised should there be any money in the estate we are to let them know). She had an interest only mortgage on a property, the money she owed is not far off what the value of the property is worth by the time you add in legal fees ect we feel we may as well just hand the keys back in to the mortgage company. Does anyone know whether you still have to go through probate in order to hand the keys back to the lender? I have tried to contact the bank in order to ask but all they said was to go in branch and fill a form in. I am worried in case the value of her estate does come to something (there were discretionary pension amounts awarded to my parents) and if probate has to be completed the debters come chasing for their share of any money.

I would be very grateful for any advice you could give us.

Many thanks

magpiecottage

I presume, from the nature of your query that you are concerned that creditors will come seeking money (it is your sister that was the debtor).

They cannot normally seek to recover those debts from you or your family unless you were a guarantor or a joint borrower.

If you are an executor, you do have a duty to manage any conflicting claims on the estate but even then there is a set pecking order (the mortgage lender has first claim on the proceeds of the house, for example, and I believe funeral costs and the excutors' reasonable expenses can be paid out of any funds before creditors are reimbursed).

Money from paid from a pension arrangement at the discretion of the trustees of that arrangement is the legal property of the trustees, not the estate. That means creditors cannot make a claim on it.

Whether you choose to let the bank take possession of the property or not is your choice but you will need to remove any effects from it (effectively move out) and dispose of them. As a rule of thumb, selling yourself is likely to be a little cheaper as you will not incur the costs of securing the property and have more control over the price accepted.

On the other hand, from experience it is not much fun having to go back into the former home of a loved one - in my case for over a year afterwards, maintain it, insure it, pay council tax on it and attend to all the other things you find stacking up. That could leave you out of pocket with no funds to reimburse yourself.

Thrugelmir

Did your sister leave a will? Were executors appointed?

My observation would be that she died a while ago. So who has been administering her estate since? Danger that personal liability could fall on someone.

Where a person dies before a bankruptcy petition has been presented, a petition for an insolvency administration order can be presented to the court by;

a creditor or creditors jointly,
the deceased's personal representative,
a temporary administrator (within the meaning of Article 38 of the EC Regulation on Insolvency Proceedings),
a liquidator appointed in proceedings by virtue of Article 3(1) of the EC Regulation on Insolvency Proceedings,
where the deceased entered into a voluntary arrangement, the supervisor of that arrangement or a creditor bound by it,
the official petitioner, where the deceased person was subject to a criminal bankruptcy order.
Where the petition is presented by a creditor or personal representative the court must be shown that it is reasonably probable that the estate is insolvent before an insolvency administration order will be granted.

Between the presentation of the petition and the making of an insolvency administration order, the court may appoint the official receiver as interim receiver to protect the assets. The official receiver's duties may be restricted so care should be taken to ensure any restrictions are observed. Otherwise, the official receiver as interim receiver has all the powers and duties of a receiver and manager. The personal representative has a duty to co-operate with the interim receiver and to provide details of the assets which should be taken into immediate possession pending the hearing of the petition.