‘What happens to debt when you die’ is an excellent if slightly morbid question. Many of us probably have images of a Dickensian situation occurring where children now must work off the debts of their parents.
Fortunately, it isn’t anything like that. Still, the amount you owe could affect how much your loved ones receive in terms of inheritance. To find out more, read on.
Unfortunately, debt doesn’t quite die with you. Speaking on the matter, a spokesperson from the Money Advice Service stated: “Technically speaking, if you pass away, it is the responsibility of your estate to pay any debts. If you have no estate, or the estate isn’t sufficient to cover all liabilities, they get written off and creditors cannot chase surviving family members, no matter how big the debt. However, there are some exceptions.”
Therefore, in most cases, outstanding debts will be repaid through the estate. Notable exceptions come in the event of joint debts or guarantors.
If a guarantor was named on an account of the deceased, then that individual would now likely be responsible for any sums owed. In a similar fashion, where joint debts are involved, the other person named on the account should now be accountable for these.
Of course, there are exceptions to the rule – and providers are often happy to renegotiate in the event of someone’s death.
According to Age UK, about 20% of people over 60 owe money on debts such as mortgages, credit cards, and loans. Research has also previously shown that older people are less likely than younger individuals to seek debt advice. However, as we get older, it’s advisable to resolve any ‘loose ends’ so our loved ones don’t end up being affected.
In a way, debt ceases to become a problem after you die. However, any outstanding sums could directly affect how much your loved ones receive in terms of inheritance. Perhaps the last thing anyone wants is a creditor getting a share of your assets when you pass.
Before we die, it’s a great idea to ensure all business is resolved – this includes debts. It’ll also stop family members from receiving any nasty surprises and discovering you’re in a worse financial situation than you may have let on.
Although there are many possible solutions out there, a debt consolidation loan – even if you have bad credit – could be one way to quickly deal with your creditors.
To find out more information, get in touch today. We’re just at the end of the line!