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Scottish Insolvency for a deceased person ...

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Andysaint
Andysaint Posts: 18 Forumite
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edited 16 March 2023 at 3:59PM in Bankruptcy & living with it
Hi

My other passed away just over 6 months ago, and my dad discovered that she owed around £20,000 in loans / credit card debts due to letters that came via the post. 

They own the property they live in, but have previously take about a third of the value out in equity. After paying mums funeral there was around £6,000 available after selling her car and money she had in a bank account. My dad went to a solicitor and they advised to go for insolvency of my mums estate. 

The solicitors took the letters my dad got from creditors and checked mums credit file, and wrote to all the creditors to advise they had 120 days to put in a claim of the money owed. I know that two of these are from very old debts that mum appears to have been paying over many years, and between them make up around £15,000 of the £20,000 debt - both around 15 years old. 

Solicitors have now came back stating creditors are claiming £18,000 and with the £6,000 of available funds that leaves a balance of £12,000 for my dad to pay them. He is in his 70s, has enquired about taking out more equity in the house and was told he is currently not able to be considered due to inflation etc

He has a poor credit file himself, and cant take a loan out. He has literally zero savings and lives now on a state pension and half of my mums own private pension which is only an extra £200 a month on top of the state pension. 

Solicitors advise him he can pay the £12,000 owed over a 4 year period at £250 per month, but he simply cant afford this. To me the solicitors are the ones who advised to go for insolvency (I can see mums details on the Accounts in Insolvency website) and should surely be advising the creditors he doesnt have the means to pay the extra £12,000 and should pro rata paying the creditors a third of the amount owing to them from the £6,000?

Am I wrong in thinking this is what applying for insolvency means, as otherwise I dont see the point if they dont write off what cant be paid? - would my dad be expected to sell his house now to pay this sum? - it seems the solicitors said to him he can maybe make an offer to the creditors, but as said he doesnt have the funds. 

Any advice much appreciated. 
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  • luvchocolate
    luvchocolate Posts: 3,272 Forumite
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    Are any of the debts joined with your Father?
  • Andysaint
    Andysaint Posts: 18 Forumite
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    Are any of the debts joined with your Father?
    Hi. No all the debts are only in my mums name. He has nothing to do with them. Both their names are on the title deeds for the house though. 
  • sourcrates
    sourcrates Posts: 29,154 Ambassador
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    edited 16 March 2023 at 5:11PM
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    I`m not too hot on Scottish law, but if the debts were solely your mums, and her assets don`t cover everything that is owed, then that`s just tough luck on the creditors, dad can`t be held liable for another persons debts.

    What happens to your Debts When you Die? – Advice Scotland

    This is from the above website -

    "However, if you have no money left when you die, or what you have is only enough to pay off your funeral and death bed expenses; or if there is money left, but not enough to pay your debts in full, then your estate is effectively insolvent, which means there is not enough money to pay your debts.

    In such a situation money should not be given to any of the people that are named as beneficiaries in your will until all your debts are paid.

    If there is no money left to pay your debts, your lenders will normally write them off if they are notified of your death, otherwise they are usually written off by law because they become statute barred".

    Basically if dad can`t pay what they are asking, the creditors cannot force him, as the debts are not his, so they would eventually go statute barred, or "prescribed" in Scotland, after a period of 5 years.

    Must be using a crap solicitor if they have not explained all this to him.

    I’m a Forum Ambassador and I support the Forum Team on the Debt free wannabe, Credit file and ratings, and Bankruptcy and living with it boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.For free non-judgemental debt advice, contact either Stepchange, National Debtline, or CitizensAdviceBureaux.Link to SOA Calculator- https://www.stoozing.com/soa.php The "provit letter" is here-https://forums.moneysavingexpert.com/discussion/2607247/letter-when-you-know-nothing-about-about-the-debt-aka-prove-it-letter
  • Andysaint
    Andysaint Posts: 18 Forumite
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    edited 16 March 2023 at 5:18PM
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    I`m not too hot on Scottish law, but if the debts were solely your mums, and her assets don`t cover everything that is owed, then that`s just tough luck on the creditors, dad can`t be held liable for another persons debts.

    What happens to your Debts When you Die? – Advice Scotland

    This is from the above website -

    "However, if you have no money left when you die, or what you have is only enough to pay off your funeral and death bed expenses; or if there is money left, but not enough to pay your debts in full, then your estate is effectively insolvent, which means there is not enough money to pay your debts.

    In such a situation money should not be given to any of the people that are named as beneficiaries in your will until all your debts are paid.

    If there is no money left to pay your debts, your lenders will normally write them off if they are notified of your death, otherwise they are usually written off by law because they become statute barred".

    Basically if dad can`t pay what they are asking, the creditors cannot force him, as the debts are not his, so they would eventually go statute barred, or "prescribed" in Scotland, after a period of 5 years.

    Must be using a crap solicitor if they have not explained all this to him.

    So the creditors can not force the sale of his house to cover these debts? ... as the solicitors told him my mums half of the house is still part of her estate even though she has passed away?
  • molerat
    molerat Posts: 32,146 Forumite
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    Surely it is all down to precisely how the house was owned and any equity in it ?
    Was the house owned as Joint Owners with a survivorship destination (joint tenants) or as Joint Owners (tenants in common) ?
    Your solicitor should be able to answer that one in simple terms
  • Andysaint
    Andysaint Posts: 18 Forumite
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    molerat said:
    Surely it is all down to precisely how the house was owned and any equity in it ?
    Was the house owned as Joint Owners with a survivorship destination (joint tenants) or as Joint Owners (tenants in common) ?
    Your solicitor should be able to answer that one in simple terms
    Hi. I have the deeds and in the Proprietorship section it list both their names and the address followed by the wording 'equally between them and the survivor of them'.
  • sourcrates
    sourcrates Posts: 29,154 Ambassador
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    In that case it looks like they owned the whole together, and on the death of one person, the rule of survivorship would prevail.

    Again, I am no expert on these matters, but from what it says on the deeds, it looks like the house cannot be touched, and forced payment of the debts would not be possible.
    I’m a Forum Ambassador and I support the Forum Team on the Debt free wannabe, Credit file and ratings, and Bankruptcy and living with it boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.For free non-judgemental debt advice, contact either Stepchange, National Debtline, or CitizensAdviceBureaux.Link to SOA Calculator- https://www.stoozing.com/soa.php The "provit letter" is here-https://forums.moneysavingexpert.com/discussion/2607247/letter-when-you-know-nothing-about-about-the-debt-aka-prove-it-letter
  • Andysaint
    Andysaint Posts: 18 Forumite
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    Thanks for your feedback. I think I will contact a debt advice charity for further clarification aswell. I feel the solicitors are just out to grab as much money from my dad as they can tbh. 
  • fatbelly
    fatbelly Posts: 20,800 Forumite
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    If the property was jointly owned then it passes to the surviving partner and does not form part of the deceased's estate.

    This case all sounds odd to me - though it could be a quirk of Scottish Law.

    I would advise him to run it past a Law Centre. There are a few in Scotland - Glasgow, Edinburgh, Dumbarton, Dundee, Ardrossan, Fife
  • Keep_pedalling
    Keep_pedalling Posts: 16,965 Forumite
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    It is not a case of going for insolvency the estate is either insolvent or it isn’t, and in this case it appears it is. For an insolvent estate with multiple creditors those creditors should receive a a payment in proportion to the debf of any money there is after funeral cost and nothing in addition from family members.

    For example if there is a debt of £10k and another of £20k and only £6k in the estate then the creditors get £2k and £4k respectively. 
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