Debt when someone dies
When someone dies, debts they leave are paid out of their 'estate' (money and property they leave behind). You're only responsible for their debts if you had a joint loan or agreement or provided a loan guarantee - you aren't automatically responsible for a husband's, wife's or civil partner's debts.
The estate
A person's estate is made up of their cash (including from insurance) and investments, property and possessions.
After someone dies their estate is handled by one or more 'executors' - or an 'administrator' if there wasn't any will. This is usually a relative or friend and/or a solicitor.
If the estate's worth above a certain amount the executor or administrator will need special permission - called 'probate' or 'letters of administration' - to be able to deal with the person's affairs. This includes paying off their debts.
If there's not enough money to pay outstanding debts
In this case, the estate has to pay off any outstanding debts in a set order before anything is given to people named in the will, or until the money runs out.
Debts if you owned a home together
If you jointly owned your home and there's not enough money elsewhere in the estate to pay off the deceased person's debts, there is a chance that your home would have to be sold. Your options to avoid a sale depend on whether you owned it as 'tenants in common' or 'joint tenants'.
'Tenants in common'
If you were ‘tenants in common’, each of you owned a stated share of the property. The share belonging to the person who has died becomes part of their estate and goes to whoever is mentioned in their will. But if there are outstanding debts these must be paid first from that share.
To avoid a sale of the home, you and/or anyone due to inherit the second share will need to negotiate with those owed money ('creditors') and find the necessary money.
'Joint tenants'
If you were ‘joint tenants’, you owned the whole property together and the deceased person's share passes automatically to you.
But even though it's now in your estate, you can't ignore the debts. Creditors can apply for an 'Insolvency Administration Order' within five years of the death.
This can have the effect of dividing the property in two and can force a sale. So it's in your interest to try to come to an agreement with people who are owed money and try to pay them yourself.
Information as to whether you own the property as 'tenants in common' or 'joint tenants' may be shown in the Transfer or Lease by which you acquired the property, or in a Trust Deed or Will.
The land register may also provide a clue, but Land Registry cannot advise you on which kind of ownership you have chosen.
How different debts are paid off
Mortgages
If the mortgage lender required life insurance this may pay off the full amount of the loan. If there isn't any insurance, or if there were second mortgages not covered by insurance, the property may have to be sold.
Rent arrears
If you are a joint tenant in rented property you must pay off any rent arrears. You are not liable for the previous rent arrears if you take over a tenancy.
Fuel bills
If you've been living in the property jointly you may be liable for fuel bill arrears. Contact the Consumer Council for Northern Ireland or the Utility Regulator.
Personal loans, credit cards and credit debt
Repayment of these debts must wait until others have been settled. If cards are held jointly, any debts will be the joint holder's responsibility but check to see if you're covered by a payment protection plan.
Bank account
If this was in the person’s sole name, no one will be able to touch the money until the estate is sorted out. If you had a bank account in joint names, you can still usually use the account.
Savings
If you think there may be savings in a lost bank or building society account, a search can be carried out by using a free application online.
Tax debts and overpaid benefits
Any tax owed, or overpaid benefits or pension would be paid out of the estate. To prevent benefit overpayments and check if tax is owed, contact the relevant office as soon as possible.
- Bereavement Service
- Over-payments of benefits and financial support
- Dealing with a deceased person's money and property
- Tax and other debts owing to HM Revenue and Customs
- Northern Ireland Pension Centre
- Jobs and Benefits offices
- Pension Tracing Service - trace a personal or company pension scheme
Checking for insurance to cover debts
Always check carefully to see if the deceased person's debts are covered by:
- death cover for a mortgage
- payment protection cover for personal loans or credit cards
- 'death in service' from a pension (payment of a lump sum if the person dies before pension age)
- Dealing with a deceased person's money and property
- Documents and information needed when someone dies
Help and advice
If you would like advice the following organisations may be able to help: