Credit cards during probate

DevonMark_2

Hi.

In a situation were upon death an individual has some credit card debt, no cash, but a fully owned house (with mortgage paid off) what happens to the credit card debt?

Do minimum payments have to be made on the credit cards by the benefactor of the will, even though the cash to pay them isn't readily available?

Do the minimum payments freeze during probate?

Do the minimum payments freeze until the house is sold or re-mortgaged to release cash?

Any advise greatly appreciated.

Thanks

g6jns_2

DevonMark wrote: »

Hi.

In a situation were upon death an individual has some credit card debt, no cash, but a fully owned house (with mortgage paid off) what happens to the credit card debt?

Do minimum payments have to be made on the credit cards by the benefactor of the will, even though the cash to pay them isn't readily available?

Do the minimum payments freeze during probate?

Do the minimum payments freeze until the house is sold or re-mortgaged to release cash?

Any advise greatly appreciated.

Thanks

The credit card balance is a debt of the estate. Companies vary on the question of interest. It would be up to the executor to contact them to find out. There is no obligation on a beneficiary to pay anything. The lender would just have to wait until probate is granted and the executor distributes the estate.

Armchair23

When my husband died I contacted the credit card company, there was an outstanding amount of appx £500.

They froze the balance i.e. no interest charged, until the probate was settled at which time, as there were funds, they were given the sum.

Incidentally, I'm sure a lot of you are already aware. but if you're the secondary cardholder and the main cardholder dies your card gets cancelled.

If like me you knew that your spouse had a terminal illness , however callous it might seem, make sure you get a card in your name.

Mattygroves2

Another option is for the executor to pay the balance and then reclaim from the estate once probate has been granted and the house sold.

g6jns_2

Mattygroves2 wrote: »

Another option is for the executor to pay the balance and then reclaim from the estate once probate has been granted and the house sold.

An executor should not do that. All debts should usually be treated the same way. None should be given precedence unless there are exceptional circumstances. The exception might be the undertaker if there are sufficient liquid funds available.

DevonMark_2

I think what I'm asking is, does probate carry on indefinitely until the house is sold (at which point the credit card debts can be settled)?

While the house remains unsold, are the debts frozen? Or does it become compulsory to release cash from the house by selling/re-mortgaging?

antrobus

DevonMark wrote: »

I think what I'm asking is, does probate carry on indefinitely until the house is sold (at which point the credit card debts can be settled)?...

Technically speaking, 'probate' is simply the process by which one or more people acquire the legal right to deal with the deceased's estate. It is simply the first stage in the process of administering estate; once you have probate confirmed by the court, then the executor has the power to actually transfer the legal title in the property to someone else.

DevonMark wrote: »

...While the house remains unsold, are the debts frozen?

That depends on the creditor.

DevonMark wrote: »

....Or does it become compulsory to release cash from the house by selling/re-mortgaging?

Eventually, yes. If the only asset in the estate is a house, and the estate has debts, then the house will either have to be sold to pay those debts, or the person expecting to inherit the house will have to come up with the money.

DevonMark_2

antrobus wrote: »

Eventually, yes. If the only asset in the estate is a house, and the estate has debts, then the house will either have to be sold to pay those debts, or the person expecting to inherit the house will have to come up with the money.

OK, great, this is what I was confused about.

How long is 'eventually' (is it the same length as a piece of string?!)?

Or is there a rough estimate of time?

g6jns_2

antrobus wrote: »

Technically speaking, 'probate' is simply the process by which one or more people acquire the legal right to deal with the deceased's estate. It is simply the first stage in the process of administering estate; once you have probate confirmed by the court, then the executor has the power to actually transfer the legal title in the property to someone else.



That depends on the creditor.



Eventually, yes. If the only asset in the estate is a house, and the estate has debts, then the house will either have to be sold to pay those debts, or the person expecting to inherit the house will have to come up with the money.

The beneficiary has no liability for the estate's debts. These are the sole responsibility of the executor(s). In practical terms the beneficiary might decide that doing so was the way to short cut the house being conveyed to them.

g6jns_2

DevonMark wrote: »

OK, great, this is what I was confused about.

How long is 'eventually' (is it the same length as a piece of string?!)?

Or is there a rough estimate of time?

The rule of thumb is that executors have a year to deal with the estate but this is not set in stone. On average I would say six months is enough time unless the estate is complex. When there is a property involved executors have to take a balanced view if it needs to be sold. Often putting it up for auction is best as this stops the sale being long drawn out and removes any room for any argument about the property's value.

Mattygroves2

g6jns wrote: »

An executor should not do that. All debts should usually be treated the same way. None should be given precedence unless there are exceptional circumstances. The exception might be the undertaker if there are sufficient liquid funds available.

Very common for the executor to pay for liabilities of the estate before probate is granted- insurance, gas bills, electricity bills for the house before it is sold and also IHT if you want to avoid the interest charges. In my OHs case with his parents we've paid all of those plus cash to someone to keep an eye on the property and the deceased's credit card bills from our own funds and will reclaim them before the estate is finally divided. All agreed with his fellow executor and no other option really as she didn't have the ready cash available. If you can it's cheaper and easier than having to negotiate.

Provided the Estate is clearly solvent there should be no problems. In our case it was clearly solvent but it seemed daft to pay interest on the IHT due when we could settle it ourselves and then wait for probate and the sale of the investments and property before being reimbursed.