Paying debts from an estate that doesn’t have enough to cover all debts plus car lease debt options

ss2020jd

Hi I’m not sure if I should be posting here or in the debt section so any advice would be gratefully received. Apologies in advance for the lengthy post.

My stepfather died suddenly two months ago and my mum is the executor and sole beneficiary. There was no probate needed and the bank transferred my stepdad’s balance of approximately £10,000 to my mum’s account as she was the executor. The house was owned as joint tenants and the land registry has already removed my stepfather’s name on the title. 

His debts total more than the £10,000 he had so I understand these have to be paid in priority order out of the £10,000 from his estate. There are no other assets such as pensions or insurance or shares etc.

My stepdad had a car lease agreement and when we notified the finance company of his death they passed to another company who wrote with options:
 

- sell the vehicle or part exchange either to a third party or a dealership. The settlement figure to be paid directly would be in the region of £20,000 +

- voluntary terminate the agreement by returning the vehicle and paying almost £10,000 which only the Estate is liable for. 

With the other debts of funeral expenses of around £3700 plus credit card of £600 and an invoice outstanding to a home alarm company for about £160  there would not be the full amount to be paid to the car lease company. They have said they can only take what is in the estate and no more. I have asked them to send the breakdown of how they reached that figure in the meantime. 

I contacted the dealership and they said they could potentially buy the car back and the estate could pay the shortfall to them and then in turn they would settle with the finance company. The finance was arranged through them in the first place. The amount in this case to repay would likely be £6000. However despite saying to contact the dealership initially, the company collecting on behalf of the finance company said that that option could only be taken if they were going to pay more for the vehicle. Presumably this is because they would not get commission if the dealership settled with the finance company.

It is likely they would only receive approximately  £6000 if all debts were paid on a pro-rata basis. I believe they are requesting the amount on behalf of, not that they have actually bought the debt. 

If anyone has any experience or advice on the best way to approach this I would be very grateful. 

Cashmygiro

The deceased's £10,000 should have went to pay his debts but his creditors can't make you pay up the shortfall from your own pocket. 

Sea_Shell

I believe there are quite strict rules for dealing with insolvent estates and there is also the issue of "intermeddling" which you might want to read up on.


You might have been able to hand the keys back and advise that the estate was insolvent and not being administered...but you may have  passed that point?

Keep_pedalling

Cashmygiro said:

The deceased's £10,000 should have went to pay his debts but his creditors can't make you pay up the shortfall from your own pocket. 

Not entirely correct, the first call on an estate is secured debt, next funeral costs, then unsecured debt and finally the beneficiaries ( who will get nothing if the estate is insolvent). In this case the car finance is secured against the car, but any shortfall will be classed as unsecured debt. After funeral costs there is only £6700 available so each creditor should get a part  of that proportional to the size of the debt. 

The OP should write to each of the  creditors requesting a final statement on the amount owed and once they have that calculate the amount to be paid to each. Once that is done write back to those creditors informing them that the estate is insolvent and that they are they are only going to receive a partial payment of £x pounds. They are not going to waste a lot of effort pursuing such a small amount especially as without probate they don’t have access to the estate records.

Cashmygiro

Keep_pedalling said:

Cashmygiro said:

The deceased's £10,000 should have went to pay his debts but his creditors can't make you pay up the shortfall from your own pocket. 

Not entirely correct, the first call on an estate is secured debt, next funeral costs, then unsecured debt and finally the beneficiaries ( who will get nothing if the estate is insolvent). In this case the car finance is secured against the car, but any shortfall will be classed as unsecured debt. After funeral costs there is only £6700 available so each creditor should get a part  of that proportional to the size of the debt. 

The OP should write to each of the  creditors requesting a final statement on the amount owed and once they have that calculate the amount to be paid to each. Once that is done write back to those creditors informing them that the estate is insolvent and that they are they are only going to receive a partial payment of £x pounds. They are not going to waste a lot of effort pursuing such a small amount especially as without probate they don’t have access to the estate records.

So basically I am correct. Debts get paid from deceased estate. 

Keep_pedalling

Cashmygiro said:

Keep_pedalling said:

Cashmygiro said:

The deceased's £10,000 should have went to pay his debts but his creditors can't make you pay up the shortfall from your own pocket. 

Not entirely correct, the first call on an estate is secured debt, next funeral costs, then unsecured debt and finally the beneficiaries ( who will get nothing if the estate is insolvent). In this case the car finance is secured against the car, but any shortfall will be classed as unsecured debt. After funeral costs there is only £6700 available so each creditor should get a part  of that proportional to the size of the debt. 

The OP should write to each of the  creditors requesting a final statement on the amount owed and once they have that calculate the amount to be paid to each. Once that is done write back to those creditors informing them that the estate is insolvent and that they are they are only going to receive a partial payment of £x pounds. They are not going to waste a lot of effort pursuing such a small amount especially as without probate they don’t have access to the estate records.

So basically I am correct. Debts get paid from deceased estate. 

Yes, apart from the bit where you said the whole £10,000 should go to the creditors.

ss2020jd

Thanks very much for the replies.
 It’s very helpful to know that @Keep_pedalling. I wasn’t sure of the correct order to do things but if I calculate the pro rata amounts due so they get an equal share and offer them that. 

I will try to ascertain if I can also go direct with the car dealership/finance company as well. 

Keep_pedalling

ss2020jd said:

Thanks very much for the replies.
 It’s very helpful to know that @Keep_pedalling. I wasn’t sure of the correct order to do things but if I calculate the pro rata amounts due so they get an equal share and offer them that. 

I will try to ascertain if I can also go direct with the car dealership/finance company as well. 

Pro rate does not mean an equal share but a share proportional to the amount owed. For instance if an estate has two creditors, one owed £10k another £5k and there is only £6k available, the former will get £4k and the latter £2k.
 

Cashmygiro

Keep_pedalling said:

Cashmygiro said:

Keep_pedalling said:

Cashmygiro said:

The deceased's £10,000 should have went to pay his debts but his creditors can't make you pay up the shortfall from your own pocket. 

Not entirely correct, the first call on an estate is secured debt, next funeral costs, then unsecured debt and finally the beneficiaries ( who will get nothing if the estate is insolvent). In this case the car finance is secured against the car, but any shortfall will be classed as unsecured debt. After funeral costs there is only £6700 available so each creditor should get a part  of that proportional to the size of the debt. 

The OP should write to each of the  creditors requesting a final statement on the amount owed and once they have that calculate the amount to be paid to each. Once that is done write back to those creditors informing them that the estate is insolvent and that they are they are only going to receive a partial payment of £x pounds. They are not going to waste a lot of effort pursuing such a small amount especially as without probate they don’t have access to the estate records.

So basically I am correct. Debts get paid from deceased estate. 

Yes, apart from the bit where you said the whole £10,000 should go to the creditors.

I'm going off the fact that the OP title says there isn't enough to cover it all therefore I'm going by the notion that the debts are repaid with the £10,000 until exhausted.

silvercar

This becomes difficult because the car lease company take the car back and get a share of the £10k. So are they double dipping? Presumably not as they own the car, but the value they put on the car decides how much is outstanding and that determines their proportion of the £10k.

ss2020jd

silvercar said:

This becomes difficult because the car lease company take the car back and get a share of the £10k. So are they double dipping? Presumably not as they own the car, but the value they put on the car decides how much is outstanding and that determines their proportion of the £10k.

Yes, exactly. It will be less than the amount requested from the company collecting on behalf of eg 6000 versus 9000 but as there will not be enough to pay the full amount of 9000 it will likely work out the same amount available to be paid. I’m just concerned the company collecting will still pursue as it’s not being settled directly with them.