Priority creditor ranking

janetelfer

I am the executor of my daughter's will.

Sadly, and unknown to us, she incurred a huge amount of debt to a number of creditors, and I have been communicating with them since her death in May 2023. A slow process, but I have finally whittled these creditors down to just two - the local council for overpayment of housing benefit, and her power supplier for unpaid bills.

I thought that these were both priority creditors and so wrote to both with my calculation of the relative apportioned amounts to be paid from the estate. The debt collector for the power supplier, after consulting with that power supplier, agreed my figures. However, the local council has written to tell me that Housing Benefit Overpayment takes precedence over unsecured debts including Utility bills, credit cards etc., and that all remaining funds should be paid to them.

I have informed the debt collector acting for the power supplier of the council's position and I'm waiting for their reply. 

In the meantime, I would be grateful if anyone could say whether I was wrong to assume that the two debts carried equal weight and that the council is correct and all remaining funds should go to them.

Thank you

Brie

Yes council takes priority over utilities.  

But have you considered asking the utilities to write off the debt?  Do you know that she was on the correct tariff and that their final bill is correct?

bobster2

This guidance seems to treat benefit overpayments in same category as other unsecured debts...

https://www.gov.uk/government/publications/benefit-overpayment-recovery-staff-guide/benefit-overpayment-recovery-guide#chapter-7--recovery-from-estates-rfe

Where there are insufficient funds in the estate to meet all the debts

7.19. There is a priority order to follow when the Personal Representative establishes that the estate does not contain sufficient funds to pay all creditors in full, after paying funeral and estate expenses.

7.20. If there are insufficient funds to pay all the creditors in one group in full, they are expected to pay them on a pro-rata basis. Where this is correctly applied to a DWP claim, the part payment is accepted in settlement of that claim.

fatbelly

I cannot see why the council debt would take priority. As an executor I would treat the two debts equally.

They are both unsecured nonpriority debts

Ask them what legislation they are referring to.

janetelfer

Brie said:

Yes council takes priority over utilities.  

But have you considered asking the utilities to write off the debt?  Do you know that she was on the correct tariff and that their final bill is correct?

Thank you for your reply. 

I have no reason to dispute the utility debt, but I haven't asked for it to be written off because my research led me to believe that it was a priority debt.

Can I ask: do you have a link that I can follow to some legislation that supports your view? This would be very helpful as I have only been able to find evidence for overpaid housing benefit being just one of several unsecured priority debts, as the link provided in another reply to my post also.suggests.

Cheers.

janetelfer

bobster2 said:

This guidance seems to treat benefit overpayments in same category as other unsecured debts...

Where there are insufficient funds in the estate to meet all the debts

7.19. There is a priority order to follow when the Personal Representative establishes that the estate does not contain sufficient funds to pay all creditors in full, after paying funeral and estate expenses.

7.20. If there are insufficient funds to pay all the creditors in one group in full, they are expected to pay them on a pro-rata basis. Where this is correctly applied to a DWP claim, the part payment is accepted in settlement of that claim.

Thank you for the link - I haven't seen this before but it is in line with other results of my research which led me to the conclusion that the council debt doesn't appear to outrank any other priority debt. I feel sure I've read somewhere that government debt (presumably this includes local government debt) had its priority status removed recently, and it becomes just one of several priority debts.

Cheers

janetelfer

fatbelly said:

I cannot see why the council debt would take priority. As an executor I would treat the two debts equally.

They are both unsecured nonpriority debts

Ask them what legislation they are referring to.

Thank you for your reply. If, as I'm trying to avoid, it looks like being a legal wrangle betwwen the two debtors, asking for some proof will be the way to go.

janetelfer

For completeness in this thread, I have been in contact today with the debt collection company acting for the power supplier. I explained that the council had stated that they wanted the entire estate paid to my daughter's overpaid housing benefit account. Surprisingly, to me anyway - though Brie would expect the outcome, they have accepted the council's position and are closing their account. I'm just waiting for written confirmation of that closure before making the payment to the council. So nice to bring this whole process to a close at last.

Thank you again to those who offered me their help.

msb1234

A good outcome for you Janet. I’m sure the very last thing you needed to be faced with when coming to terms with your daughter’s death is dealing with creditors. I’m dealing with them on behalf of my late mother and although they are always courteous, I could do without the angst of getting the legalities right, 

Brie

I'm glad you got things resolved with the utilities.  Granted they know that those who are alive and working are struggling to keep up with bills and they need to write off a lot of that debt.  Taking after those who are dead or grieving isn't going to achieve much for them.  

I hope you manage to sort everything else out in the fullness of time.  

kaMelo

The best could find was this list for the prescribed priority order categories for debt repayment from an insolvent estate. Important to note that you must clear all creditors debts in a category before you can move onto the next (lower priority) category. 
https://www.bereavementadvice.org/topics/probate-and-legal/insolvent-estates/

It also lists debts to central/local government within the same priority category as utility bills.