Debt after Death confusion.

Ms_Chocaholic

Did you not have any life assurance associated with the mortgage?

Crabapple

Found some explanation here https://www.insolvencydirect.bis.gov.uk/casehelpmanual/D/DeceasedInsolvents.htm



7. What happens to property that was owned under a joint tenancy by the deceased debtor prior to his/her death? The deceased debtor's interest in property owned under a joint tenancy will pass automatically to the other joint owner or owners by right of survivorship, and will never become part of the insolvency estate.
The trustee may seek to recover the value of the deceased debtor's interest in the property that has been lost to the estate by making an application to the court under section 421A. On the application of the trustee the court may make an order requiring the surviving partner to pay to the trustee an amount not exceeding the value lost to the estate. Section 421A came into force on 02 April 2001 and applies where an insolvency administration order has been made in respect of the deceased debtor and the petition for that order was presented within the period of five years beginning on the day on which he/she died.

So a bit technical and referring to a trustee in bankruptcy, but basically if a share in a jointly owned property existed the joint owner can be made to pay cash to the estate to the 'value lost to the estate'. In this case that would probably be the amount of the debts.

G6JNS

Crabapple wrote: »

Found some explanation here https://www.insolvencydirect.bis.gov.uk/casehelpmanual/D/DeceasedInsolvents.htm



7. What happens to property that was owned under a joint tenancy by the deceased debtor prior to his/her death? The deceased debtor's interest in property owned under a joint tenancy will pass automatically to the other joint owner or owners by right of survivorship, and will never become part of the insolvency estate.
The trustee may seek to recover the value of the deceased debtor's interest in the property that has been lost to the estate by making an application to the court under section 421A. On the application of the trustee the court may make an order requiring the surviving partner to pay to the trustee an amount not exceeding the value lost to the estate. Section 421A came into force on 02 April 2001 and applies where an insolvency administration order has been made in respect of the deceased debtor and the petition for that order was presented within the period of five years beginning on the day on which he/she died.

So a bit technical and referring to a trustee in bankruptcy, but basically if a share in a jointly owned property existed the joint owner can be made to pay cash to the estate to the 'value lost to the estate'. In this case that would probably be the amount of the debts.

Interesting! This undermines the whole concept of joint tenancy.

Tuesday_Tenor

Crabapple wrote: »

Found some explanation here https://www.insolvencydirect.bis.gov.uk/casehelpmanual/D/DeceasedInsolvents.htm

So a bit technical and referring to a trustee in bankruptcy, but basically if a share in a jointly owned property existed the joint owner can be made to pay cash to the estate to the 'value lost to the estate'. In this case that would probably be the amount of the debts.

I thought that for a joint tenancy there was no concept of owning a 'share' in a property. Both people own 100% of it , but jointly with the other person. When one person dies the other person still owns 100%, but now in their sole name.

The way I would then read the insolvency text quoted, is that the trustee could come after 100% of the property, if the debts of the bankrupt were equal to or greater than this. Is that right?

Crabapple

I don't see how a creditor could try and claim the whole value of a joint property but it doesn't make clear how much would be reasonable, no. I guess in a case where huge amounts are outstanding the Court would have to decide what was appropriate.

In the context of this particular question by the OP when looking at a few £k against the value of a property I would expect all of the debt value to be reasonable. Not ideal for the OP but as we've been saying, the creditors aren't required to accept an offer of just the cash remaining in the Estate.

I don't see that it undermines the whole point of a joint tenancy either. The insolvency rules mean that you can't rely on all your assets being in joint names to avoid paying your sole name debts. That doesn't seem unreasonable tbh. A 'share' of a joint property has to be declared for Inheritance Tax purposes too even though it passes by survivorship and does not form part of an Estate for probate purposes.

One of those cases where things are not as straightforward as might originally appear.

The OP can certainly make an offer to the creditors but they aren't bound to accept it.

G6JNS

Crabapple wrote: »

I don't see how a creditor could try and claim the whole value of a joint property but it doesn't make clear how much would be reasonable, no. I guess in a case where huge amounts are outstanding the Court would have to decide what was appropriate.

In the context of this particular question by the OP when looking at a few £k against the value of a property I would expect all of the debt value to be reasonable. Not ideal for the OP but as we've been saying, the creditors aren't required to accept an offer of just the cash remaining in the Estate.

I don't see that it undermines the whole point of a joint tenancy either. The insolvency rules mean that you can't rely on all your assets being in joint names to avoid paying your sole name debts. That doesn't seem unreasonable tbh. A 'share' of a joint property has to be declared for Inheritance Tax purposes too even though it passes by survivorship and does not form part of an Estate for probate purposes.

One of those cases where things are not as straightforward as might originally appear.

The OP can certainly make an offer to the creditors but they aren't bound to accept it.

The reason I said it undermines the whole concept of the joint tenancy is that the rights of both joint tenants need to be respected. The new legislation effectively can deprive one joint tenant of their property and leave them homeless. I doubt this complies with EHR legislation.

Crabapple

G6JNS wrote: »

The reason I said it undermines the whole concept of the joint tenancy is that the rights of both joint tenants need to be respected. The new legislation effectively can deprive one joint tenant of their property and leave them homeless. I doubt this complies with EHR legislation.

Most of the information I was finding last night was for living debtors with joint property (took me ages to find death related details) and it was pretty clear that the law would be looking to charging orders and not sale of property where there are other owners.

The Court would have to balance interests and the needs of a family/co-owner living in the property would definitely outweigh those of a creditor wanting their money. I don't know whether there is much case law in this area and don't have the desire to find out tbh!

getmore4less

Only 1/2 the equity in the property would be at risk, courts would most likely just approve a charge if there were other owners living in the place.

What the threshold would be for a debtor to go down this route I have no idea.
THe legislation has been around for long enough to have examples out there.


The OP has allready said they are in an IVA and it might be that the deceased was on a DMP there is a hint in one post.


Now IVA usually involve charges on houses and the OP has just obtained more equity so will probably need to have that reviewed.

g6jns_2

getmore4less wrote: »

Only 1/2 the equity in the property would be at risk, courts would most likely just approve a charge if there were other owners living in the place.

What the threshold would be for a debtor to go down this route I have no idea.
THe legislation has been around for long enough to have examples out there.


The OP has allready said they are in an IVA and it might be that the deceased was on a DMP there is a hint in one post.


Now IVA usually involve charges on houses and the OP has just obtained more equity so will probably need to have that reviewed.

The survivor already owns the whole property by reason of survivorship. What I am saying is that effectively forcing a sale if he does not have sufficient funds to pay the other party's debt may not be allowable under EHR legislation. In the absence of any binding case law then it would be up to the court to decide.