Dealing With Debt After Someone Dies in the UK

This is the starting point for everything else: you do not inherit someone's personal debts. Their debts are paid from their Estate, before beneficiaries receive any money. That's the law in England, Wales, Scotland, and Northern Ireland.

What this means in practice:

• If the deceased had credit cards, personal loans, or other unsecured debts, those are paid from the assets they left behind (their house, savings, investments, etc.)
• If there's not enough money in the estate to pay all debts, some creditors get less or nothing
• You, as a child, spouse, or beneficiary, are not personally responsible

However, there are important exceptions. You are liable if:

• You were a joint account holder on a debt (joint debts)
• You were a guarantor on a loan
• You're the executor and mishandle the estate

Understanding which debts fall into which category is crucial.

When someone dies, their debts are paid in a strict order. Not all debts have equal priority. The order is:

If the estate runs out of money before reaching unsecured debts, those creditors simply don't get paid. They cannot pursue the beneficiaries. The estate's liability ends. You will need to notify the deceased's banks to freeze accounts and request date-of-death balance statements for the probate forms.

Secured debts

A secured debt is one backed by something physical. The lender can take the asset if the debt is not paid.

The most common secured debts:

• Mortgages: Secured on the house. When someone with a mortgage dies, the house is usually sold to pay off the mortgage, or the beneficiary inherits the house and takes on the mortgage
• Car finance and HP: Secured on the car. The car can be repossessed if payments aren't kept up
• Secured loans: The lender has a charge on a property or other asset

If there's a secured debt, the lender has the right to take the asset. However, this doesn't happen automatically. The Executor or Administrator has time (usually several months) to arrange payment from the estate or to sell the asset.

Funeral costs

Funeral costs are paid before almost all other debts, except administration costs. Reasonable funeral costs are typically £3,000 to £5,000, but can be more or less depending on the type of funeral arranged. If you are on qualifying benefits, you may be able to claim Funeral Expenses Payment from the DWP.

If the deceased's estate is very small, funeral costs can consume most or all of the assets. This is a significant issue and is where funeral insurance, or a modest life insurance policy, becomes valuable.

Unsecured debts

Unsecured debts have no security. If someone doesn't pay them, the creditor can't take anything specific; they can only pursue a court claim. The most common:

• Credit card balances
• Personal loans
• Council tax arrears
• Utility arrears
• Medical debts
• Store card balances

If the estate cannot pay unsecured debts in full, creditors simply don't get paid. They have no recourse against you or other family members.

An insolvent estate is one where debts are greater than assets. This happens surprisingly often.

When the estate is insolvent:

• Assets are sold off to raise cash
• Money is used to pay debts in priority order
• Secured creditors are paid first
• Unsecured creditors are paid whatever is left, usually in proportion to what they're owed
• Some creditors get nothing
• Beneficiaries receive nothing

For example: the deceased leaves a house worth £200,000 with a mortgage of £180,000. They also owe £30,000 on credit cards and £2,000 on a car that's worth £5,000. Total assets: £225,000. Total debts: £212,000.

The house would be sold. The £180,000 mortgage would be paid. The car would be sold and the £2,000 debt paid. From the remaining funds, funeral costs and administration costs are paid, then the credit card creditors split what's left.

In this scenario, there's still £13,000 after paying secured debts, which covers funeral costs, administration, and some of the credit card debts. Beneficiaries might receive something, or nothing.

If debts exceed assets, the executor must declare the estate insolvent. This is a specific legal process. An insolvency practitioner or solicitor can guide you.

If the deceased held a debt jointly with someone else, that person remains liable. This is the critical exception to the "you don't inherit debt" rule.

Common joint debts:

• Joint mortgages: Both partners are liable. If one dies, the other's liability doesn't end. The survivor usually has to either pay the mortgage or sell the property.
• Joint bank overdrafts: If the account is overdrawn and held jointly, the survivor can be pursued for the full amount
• Joint personal loans: Both borrowers are liable for the full amount; one partner's death doesn't release the other
• Shared utility bills: Usually not a major issue, but if the bill is in both names and unpaid, both are technically liable

If you inherited a joint debt, you are liable for paying the full amount. The creditor can pursue you for the full debt, not just a share.

What you can do:

• Check your name on the account. If you were added as a joint account holder (not just an authorised user), you're liable
• Notify the creditor of the death and ask them to close the joint account
• Arrange to separate the account or to close it
• Discuss what you can afford to pay

If you inherited a substantial joint mortgage, for example, the house would typically be sold and the mortgage paid from the sale proceeds. However, if you want to keep the house, you'd need to refinance it in your own name or with a new partner.

If you guaranteed a loan for the deceased (promised to pay if they didn't), you remain liable if they don't pay. The lender can pursue you for the full amount.

Common scenarios:

• Parent guarantees a child's student loan or first mortgage
• Adult child guarantees a parent's business loan
• Partner guarantees a partner's credit card (less common but possible)

If you guaranteed a debt:

• The lender might contact you after the person's death
• You are legally liable if the debt isn't paid from the estate
• Check whether the debt is covered. If the estate pays it in full, your guarantee doesn't matter
• If the estate can't pay it, the lender will pursue you

Seek legal advice if this applies to you. Some guarantees are unenforceable, or there might be circumstances that limit your liability.

These are unsecured debts. The deceased's credit card balances or personal loans are paid from the estate, before beneficiaries receive anything.

What you should do:

• Notify the credit card company and lender of the death
• Provide the death certificate
• Don't make payments from your own pocket (unless you were a joint holder)
• Let the estate pay these debts
• If the estate can't pay them in full, it's not your problem

You might receive letters from credit card companies or loan providers asking you to pay. Ignore these if you're not personally liable. They're hoping you'll pay out of guilt or confusion.

The only exception: if the debt is joint (see above) or you're a guarantor.

Council tax arrears are technically a secured debt (secured on the property), but they're treated differently in practice.

If the deceased owed council tax:

• The debt is paid from the estate
• If the property is sold, arrears come from the sale proceeds
• If the estate can't pay them in full, the council can pursue the sale of the property (after other mortgages are paid)

Surviving family members in the house might be liable for current council tax if they're the occupants, but they're not liable for the deceased's arrears.

If you inherit a house and there are council tax arrears, these are paid from the sale proceeds when the house is sold. If you're keeping the house, contact the council to arrange payment of the arrears from the estate.

Gas, electricity, water, and other utility providers sometimes pursue family members for unpaid bills. They generally shouldn't be able to, unless you were a joint account holder.

If a utility company pursues you:

• Check whether the bill was in both your names
• If not, it's the estate's responsibility
• Provide the death certificate
• Inform them the debt must be claimed from the estate

Most utility companies accept that the account needs to be closed after death and won't pursue surviving family members.

Hire purchase agreements are technically secured debts. The goods belong to the finance company until they're fully paid.

If the deceased was paying for something on HP:

• The goods can be repossessed if payments aren't kept up
• The debt is paid from the estate
• If you want to keep the item (car, furniture, etc.), the executor must continue payments or pay off the debt
• If you don't want it, it can be returned and the finance company absorbs the loss

You're not liable for HP debts unless you were a joint account holder.

If the deceased was in an IVA or was bankrupt:

• The IVA or bankruptcy doesn't continue after death
• Creditors can make claims against the estate
• The estate's administrator handles these claims
• You are not liable

However, if the deceased was making contributions to an IVA from income, these stop at death.

After a death, it's common for debt collectors to contact family members, sometimes aggressively. This is often harassment.

What you should know:

• Debt collectors cannot pursue family members for personal debts (unless they're joint or guaranteed)
• They should not threaten you or use aggressive language
• They often contact family members hoping someone will pay out of guilt

What to do:

• Tell them the person has died
• Provide the death certificate
• Tell them to contact the executor, not you
• If they continue contacting you, write to them formally telling them to stop
• Record all contact and keep copies of all letters

If a debt collector harasses you, you can:

• File a complaint with the Financial Conduct Authority (FCA) at www.fca.org.uk
• Report them to Citizens Advice
• Seek advice from StepChange (see below)

If you're the executor, you need to know about this important protection.

Section 27 of the Trustee Act 1925 gives executors a legal protection: if you advertise the death in a newspaper (usually the London Gazette, plus a local paper) and give time for creditors to come forward, you're protected against unknown creditors later on.

Specifically, if you:

• Advertise in the London Gazette and a local newspaper
• Give creditors at least 2 months to come forward
• Pay all creditors who respond
• Distribute the estate

Then if a creditor comes forward later, you're not personally liable. The estate is no longer responsible.

This is called the "two-month rule". Most executors and solicitors follow this procedure because it protects them. It's a standard part of probate.

If you're the executor or administrator:

1. Advertise the death: Place a notice in the London Gazette and a local newspaper
2. Give time for claims: Wait at least 2 months
3. Document all claims: Keep records of creditors who come forward
4. Verify the debts: Check whether the debts are legitimate
5. Assess priority: Determine what order debts must be paid in
6. Distribute remaining assets: After debts are paid, distribute the remainder to beneficiaries

If the estate is insolvent, you might need to involve an insolvency practitioner. A solicitor can advise on whether this is necessary.

If a creditor disputes how much should be paid, or if you believe a claim is invalid, you can:

• Ask the creditor to prove the debt
• Seek legal advice
• Set aside funds while the matter is resolved

If you're struggling with debt after someone's death, or if you inherited a debt you can't manage:

• StepChange: 0800 138 1111 (Monday to Friday 08:00-20:00, Saturday 08:00-16:00). Free debt advice and help with budgeting.
• National Debtline: 0808 808 4000 (Monday to Friday 08:00-20:00, Saturday 08:00-16:00). Free advice on all debts.
• Citizens Advice: www.citizensadvice.org.uk. Free local advice on debt and other issues.

These are all free and confidential. They can help if you're being pressured by creditors or if you've inherited a debt you can't manage.

Creditors Sometimes Pursue Family Members Illegally

Even though they have no legal right to do so, debt collectors often contact family members and imply or state that they're liable. If you feel pressured, seek advice. You're likely not liable.

The Executor Is Personally Liable If They Mishandle the Estate

Executors must follow the right procedure. If you're an executor and you distribute money to beneficiaries before paying debts, and debts later come to light, creditors can pursue you personally. This is why the two-month rule exists. Follow it.

Old Debts Sometimes Resurface After Years

A creditor might come forward with a claim years after the death, particularly if the estate is still being administered. This is another reason for the two-month rule; it's protection for the executor.

Some Utility Companies Are Persistent

Even though the deceased's utility bills aren't your responsibility, some utility companies send bills to the deceased's family long after death. These are usually not enforceable, but they're annoying. You can contact the company and provide the death certificate.

Inheritance Tax Might Need to Be Paid Even If There's Debt

Inheritance Tax is calculated on the net estate (assets minus debts), but it's still owed. If the estate is small and there's IHT due, there might not be enough to pay both IHT and all debts.

Once you understand the debt situation:

1. Apply for probate
2. Understand intestacy rules
3. Learn about inheritance tax
4. Notify banks and building societies

If you're struggling with debt or anything else after a death:

• Samaritans: 116 123 (24 hours, free)
• Cruse Bereavement Care: 0808 808 1677 (Monday to Friday 09:30-17:00)
• Mind: 0300 123 3393 (Monday to Friday 09:00-18:00)