Nerdy Note: Do debts die with you?

Former_MSE_Wendy · 8 July 2008 at 4:47PM

Do debts die with you?

Sadly the old phrase when you die your debts die with you is misleading. What you owe when you die has to be paid before anything can go to your beneficiaries. If you owe more than your assets are worth, they’ll get nothing, but won’t be asked to pay the rest of the debt. But if they’re jointly responsible for the debts, they will have to make up the shortfall.

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stogiebear · 9 July 2008 at 7:56AM

A more interesting aspect of this subject is the way that many companies will try to collect from children and even parents of dead debtors even when they know it's not the legal obligation of these relatives.

If you are gonna kick the bucket and have life insurance and a 'proper' will you (or your dependents) should be fine.

The muddle of debts is wholly in favour of the government and corporations, none of whom are on your side and just want to grab what they think they can get away with by hook or by crook.

Never EVER trust the words or empty promises of anyone who wears a tie... Do your friends wear a tie when they come to your house and chat about stuff? Why should they - they've got nothing to hide and nothing to gain...

Trust your instincts on all things and if they fail you seek help from a Citizens Advice Bureau or here before signing/doing/saying ANYTHING!

RBG_2 · 9 July 2008 at 8:29AM

Well I guess most of us in our 20's now will have our student loan taking up most of the value of our assets when we die! I know that my loan goes up by double what I repay every year! And there's no way I'm paying off any more than I have to!

JimmyTheWig · 9 July 2008 at 9:09AM

Can you choose what you pay off with your assets first? E.g.
Assets: 50k
Personal debt: 50k
Joint debt: 50k

Can you choose that your assets go towards the joint debt, then the personal debt dies with you?
Or does it have to be split pro-rata?
Or is there some other way of working it out?

morrisp6 · 9 July 2008 at 9:33AM

Hi,

I have been given alot of conflicting information about this. My father passed away recently, and i was left to sort out the finances for my mother as she wasn't able to do so.

There were a number of debts around from credit cards, and debt collection agency, and overdue mortgages etc.. a bit of a mess!

What i did find though is this:
If the debt is wholly in the person's name with no other named individuals on it, then it does die with them, credit cards, and personal loans / finance that my father took out in HIS NAME ONLY, were wiped out with the production of a death certifacte.
Joint debts, mortgage, tax bills, outstanding utility bills etc obviously not, but this was a great relief to say goodbye to these alone.

And there was no extra insurance on these credit cards either / loans.

Hope that helps someone.

Regards
Paul

Billy_Bunter_2 · 9 July 2008 at 9:50AM

Something I have been wondering lately too. My mum-in-law has just come into some money with which she is paying off her joint mortgage. She refuses however, to pay off the credit card bills, which are substantial, because they are in her husband's name. My concern is that if he dies before her, their only asset (the house) may be sold from under her to pay the debt.

Could this happen?

Billy_Bunter_2 · 9 July 2008 at 9:56AM

Thanks, that's useful to know.

Kev64 · 9 July 2008 at 9:57AM

I've got a a fair bit of debt, but it's all in my name. My wife has recently taken out a life assurance policy on me - she is the policy owner and I am the life assured. If I die before clearing my debts, will she be liable in any way to pay off my cards ?

Many thanks to anyone who can answer !

*edit: oops! - just saw morrisp6's reply above.... so it looks like my question has already been answered. :-)

morrisp6 · 9 July 2008 at 11:06AM

Kev / Billy,

Something else to bare in mind is that if a partner in a married couple passes away, and the house is in Joint names, then house is passes to the survivng partner, but crucially is NOT counted as part of the estate, and therefore isn't counted as money that is available to pay of debts, though this is only true if the house is 'Joint tenants' and not 'Tenants in common'.

as always nothing is straight forward, and the situation i was in, is more than likely to the next man's. Plenty of info on the Goverment website to help you through things. try this for starters if you are in a morbid mood

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

Paul

Matilda202 · 9 July 2008 at 12:08PM

HSBC have granted my 93 year old grandfather with a £3500 flexi loan. I bought his house off him 3 years ago, so he now has no assets. WOuld I be liable for this loan in hte event of his death?

JimmyTheWig · 9 July 2008 at 1:53PM

Matilda202 wrote: »

HSBC have granted my 93 year old grandfather with a £3500 flexi loan. I bought his house off him 3 years ago, so he now has no assets. WOuld I be liable for this loan in hte event of his death?

Did you buy the house from him for the full market value?
If so, I can't see that you have a problem.

[Though I'm not sure what he did with the money to then need a bank loan!]

Does he pay you full market rent to live there?

Nerdy Note: Do debts die with you?

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