Debts after you die, what happens to them?

Do we inherit debts when family members pass away?

Fourth row, turn at the Oak Tree, headstone number three

There is a funny story around here that has turned into legend. A happy family of four able bodied sons took over the family business when the patriarch died. All was well, and the family carried on thriving, when letters of warning and threat started to arrive and the men found that their Father had a pile of unpaid parking tickets. On further inquiry they learned that they were not obligated to pay any of these fines as inheritors of the estate, so they decided not to. The letters continued to arrive and so they wrote back to the relevant Government department informing them of the debtor’s death. The letters continued to arrive, so they went so far as to send in a copy of the death certificate, but to no avail. Shortly thereafter they found two policemen on the front step looking for the offender. With a sly smile one of the brothers proceeded to give directions to their Father’s grave and they all watched as the officers took down the notes and set off earnestly to find the man who owed them money. They always wondered what those two cops must have thought when they found the old man in his grave. Did they tape the final summons to his headstone?

Who inherits your debts?

What happens when you haven’t paid your debts and then you die? Who inherits your debt management plan? Who carries on paying the mortgage?

As we all know it is hard to ignore the debt problems that plague Britain today. The statistics speak for themselves. According to the Bank of England the average debt that any adult is likely to carry is nearly 29000 pounds. The same source also reveals that approximately 280 people a day go bankrupt.  According to Step Change, the leading debt management charity in England, people over 60 years of age are not likely to voluntarily seek help with their debt. The problem is compounded by the fact that most elderly people are not even claiming the benefits that they are eligible for. Often these people die before they can pay their debt off.

It isn’t very complicated. First of all you have to examine the debt itself. Is it unsecured? Is it in joint names? Basically the estate of the individual is responsible for paying all debts off. Should the estate not be able to cover everything, the debts then fall away and creditors cannot try to extract them from the surviving family members. If the debt was signed under joint names, it is automatically transferred to the other party. The same applies to joint mortgages. However if the mortgage was signed as tenants in common and not as joint tenants, the half belonging to the deceased could count towards their estate and thus be used to pay off debt.

Another possibility is to talk directly to your debtors if you know that there is no way you will be able to pay your debt off. Often they will offer you a moratorium, coming to an agreement on any claim that will be made from your estate. Some will even write off the debt entirely.

Any way you look at it, it is considerate to address your debts as you wrap up your worldly administration. Once you have been laid to rest, you don’t want to be haunted by debt collectors in the great here-after!!