Personal Loan Question

matrix999

Hi Everyone,

I need a little bit of help and advice with something.

My dad has recently past away and myself and my mum are going through the paperwork. We noticed that my dad took out a personal loan in Jul 2007 for £1500. He has made his first payment on 1st Sep and the next is due on 1st Nov however we have arranged for his bank account to be refered/stopped due to his death and any credit balance sent to my mum as a cheque.

I need to know if my mum or me are liable for this personal loan debt that my dad had. He never took out any insurance cover with the loan, however my dad did have life insurance cover which my mum will claim and pay for essentials such as the funeral.

Just want to know where we stand with something like this? Will the bank write off the debt or try and chase us for the money?

Thanks guys.

ziknik

I think you dads estate needs to pay off the loan before you / your mum can inherit anything. I’d phone the loan company and explain the situation

matrix999

The following website http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingDebt/DebtsAndArrears/DG_10013093

explains that a persons personal debt should not pass on to the wife/husband. Is this accurate?

matrix999

** Bump **

[Deleted User]

Hi,

I am so sorry for your recent loss of your father.

Regarding the,

a persons personal debt should not pass on to the wife/husband. Is this accurate?

I would think that this is correct, if there is not enough in your late father's estate, but if there is enough, then debts will have to be paid.

Debt_Free_Chick

matrix999 wrote: »

The following website http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingDebt/DebtsAndArrears/DG_10013093

explains that a persons personal debt should not pass on to the wife/husband. Is this accurate?

Correct. But the deceased's estate comprises their assets AND their debts. The debt is paid from what's in the estate and anything left over gets distributed in line with the will (or the laws of intestacy, if no will).

Think of this way ..... if someone had assets of £100,000 and a credit card bill for £100, it would be crazy for that bill to go unpaid.

Outstanding debts on death go into the estate - which is completely different to them "passing on to the wife/husband". Wives/husbands inherit from the estate, after the debts have been paid.

HTH

jamesd

matrix999 wrote: »

We noticed that my dad took out a personal loan in Jul 2007 for £1500. ... we have arranged for his bank account to be refered/stopped due to his death and any credit balance sent to my mum as a cheque. I need to know if my mum or me are liable for this personal loan debt that my dad had.

His estate is liable for it, before any part of the estate is paid out to others who inherit from it. If his portion of the value or any property owned and any account balances would be sufficient to pay the debt then that is required to happen and an executor who fails to do it could be personally liable to pay the debt that the estate's assets could have paid off.

If necessary his portion of the family home might have to be used to pay for the debts if savings and other assets can't do it.

The bank is fully entitled to seek the money from the estate. If money to pay it is misappropriated by paying it into other people's bank accounts instead of paying off the debt the executor who ordered the unlawful payment can be pursued.

matrix999

Thanks for your replies guys,

The house my mum and dad lives in is still mortgaged and was being paid by the benefits agency through Income Support Mortgage Interest, so the house still belongs to the building society technically.

My mum is currently waiting on a payout from my dad's life insurance, which i think is about 20k... Not a lot of money considering she still has a mortgage to pay and needs money to live now that my dad has passed away and the benefits she and my dad were getting will now stop.

With regards to the life insurance policy being paid should my mum use this money to pay off the debt?

iolanthe07

With regards to the life insurance policy being paid should my mum use this money to pay off the debt?

The short answer is yes. The executors will be obliged by law to see that this is done. Your mother will inherit what is left of the insurance policy after all your father's debts have been paid. This is only fair to the creditors. However, if there is not enough in his estate to pay all his debts, then your mother cannot be pursued for the shortfall.

I think this is correct, but you may want to take professional advice.

jamesd

Yes, she should use the insurance money to pay off the debt, assuming that the equity in the house is at least twice the debt.

The beneficiary of an insurance policy is entitled to that benefit regardless of the state of the estate, so if I was named on the policy I'd get 20,000 free and clear with no obligation at all.

This doesn't help your mother because his assets include part of the equity of the house and that equity must be used to pay the debts if necessary. So she ends up having to use the insurance money to avoid the house or other assets being used.

matrix999

Having spoken with the CCCS regarding this debt I have been advised that my mother is not responsible for the debt as she never signed the credit agreement. Also, as the house is still mortagaged and there is no insurance policy to pay the mortgage off there is no estate to pay the personal loan.

I spoke with the bank this afternoon and they have confirmed that the loan will be written off. Just waiting on them posting a letter of confirmation.