Dealing with mortgages and debt when someone dies
If a loved one has passed away, it can be useful to understand what happens to their mortgage and credit cards. This guide will walk you through the steps you’ll need to take in order to deal with the deceased’s debt after death.
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When someone die, it’s important to make sure monthly payments on their mortgage can still be made, which will prevent the lender charging fees or initiating the foreclosure process.
While the deceased’s estate is used to pay off debts, real estate has its own set of regulations. Mortgage lenders are expected to allow a surviving family member to take on the payments of the property if they inherit it, without having to prove that they can repay the loan.
Who makes the mortgage payments after death?
Lots of beneficiaries choose to sell the property they inherit as they cannot fund the monthly mortgage payments. Some are able to pay off the remaining loan if it was nearly paid off when their loved one passed, while others may re-mortgage in order to keep the property.
If the deceased’s spouse was also named as a homeowner, the loan would be passed onto them. They may find they cannot fund the ongoing payments alone, meaning they may put the property up for sale or pass it on to another family member. Life insurance policies may cover the outstanding amount owing on a property mortgage – be sure to check relevant details of your policy.
If there was a co-signer
Sometimes another individual may have co-signed for the loan, in which case they would be responsible for taking on the mortgage. This is applicable regardless of whether they currently live or have lived at the property. Co-signers who don’t own the home are at risk.
If you’re wondering “does debt get passed on?”, or you’re concerned about the debt of a loved one who has passed, the section below will help you understand what to do next.
What happens to your credit card when you die?
Credit card debts are not automatically written off. Instead, it is the responsibility of the estate to pay off any outstanding credit card debts. However, if there is not enough money in the estate to cover the debts, the debt is then wiped.
The person who is responsible for dealing with the estate must find out exactly which debts the deceased owed, and if these debts were in an individual name or a joint name with somebody else.
- If a credit card has two names on it and the other account holder is alive, that person becomes responsible for the credit card and the debt on it.
- If the credit card is only in the deceased’s name, you need to contact the bank and notify them of the death. They will freeze the account, and no more interest will affect the account.
To use the estate to pay off outstanding debts, you’ll need to apply for a Grant of Representation. This document proves you are legally obliged to handle the estate of the deceased.
Who is responsible for credit card debt after death?
It’s typically the executor or main beneficiaries who deal with the debt of the deceased. The main beneficiary may seek advice and guidance from other family members during this time if they are finding managing the debt challenging.
How to pay off the debt of a deceased person
It’s important to pay off your loved one’s outstanding debts in order of priority once you have the Grant of Representation:
- Secured debts including mortgage
- Funeral expenses
- Unsecured debts including credit cards
In some cases, you might need to sell the deceased’s assets to settle any secured debts. Typical assets you can sell are property, vehicles and valuables, such as antiques.
Once all debts are paid, any remaining assets can be distributed to the beneficiaries who have been named in the will. If the deceased didn’t leave a will, the rules of intestacy apply:
- No will = estate is distributed to the surviving spouse or children
- No spouse/children = estate is distributed to the parents or siblings of the deceased
Learn more about the rules of intestacy at GOV.UK.
If there’s not enough money to pay off the deceased’s debt, this is called ‘insolvent estate’ – it can be possible to write this debt off only if it’s insolvent (you can’t request that it’s written off otherwise), which means creditors won’t chase you or any family of the deceased, for the money.
Liability for dealing with the deceased's estate
The individual responsible for managing the deceased’s estate takes full responsibility for any mistakes that are made. For example, if a creditor asks you for money you have distributed to beneficiaries, you may have to fund the bill yourself. Solicitors will be able to advise you on this process.
Paying for the funeral with the estate
You can use your loved one’s estate to pay for their funeral, but this may only be an option after Probate has been completed (which can take up to approximately 12 months).
If your loved one has a pre-paid funeral plan, then you won’t need to worry about paying from the estate or from your own pocket. But, if there are insufficient funds in the estate to cover the funeral costs, you may be faced with paying this yourself.
If there are funds in the estate to cover the funeral, you could be reimbursed once Probate is complete. It is a long time to wait before reimbursement, and you may find that you can’t make this kind of financial commitment.
Find out more about funeral costs and the help you could receive.
What about store card debt?
If your loved one had store cards, they’ll have signed a Terms and Conditions form upon opening their account. The details of next steps to take in terms of debt will typically be outlined in these, so it’s best to contact the bank who deals with the store’s card accounts. If you don’t know the bank in question you can contact the store and they’ll be able to advise you.
During the Probate process, any outstanding store card debt is usually paid off through the estate before inheritance is released to the beneficiaries. If there are insufficient funds to cover any outstanding store card debt, this may become insolvent and the store would potentially wipe the debt as a loss. It’s important to check the Terms and Conditions to understand this in full, as it may differ for various stores.
If the individual who passed away had a student loan that wasn’t fully paid off, the (SLC) Student Loan Company will need proof of death, accepted as one of the following documents:
- Original Death Certificate
- Original coroner’s interim certificate
- Copy of coroner’s certificate stamped the coroner
- Copy of a foreign Death Certificate.
You’ll need to send a cancellation request by post to the SLC.
Has someone passed away?
Your local Funeral Director will be able to arrange for your loved one to be collected and brought into their care at the soonest available time.
They'll guide you every step of the way, from the moment your loved one passes away to making all of the necessary funeral arrangements.
Search for your local Funeral Director