Do Debts Die with the Debtor?

August 12, 2014

Luke-Notley small (Custom)After dealing with the tragic loss of a loved one, the last thing you want to be worrying about is their debt and any money their estate owes. However, after a mourning period, practical responsibilities need to be addressed and the estate of the departed needs to be resolved.


Different forms of debts can have different repercussions. Whist it is always beneficial to talk to the legal representative of the estate before making decisions, this guide can give an overview of the different repercussions caused by the different forms of debt.

Joint Debts

A Joint Debt is a debt wherein two or more parties are legally responsible for repayments. Any parties named on a credit agreement or mortgage agreement is responsible as part of a Joint Debt. If one party dies, the survivor/s assumes the added responsibility of the debt. There are some exceptions to this and the terms of the agreement should be checked for confirmation.

Some life insurance deals negate the necessity to pay off debts in the occurrence of death. If your partner or somebody with whom you share a Joint Debt dies, check the details of any life insurance policy to determine if the debt continues or is wiped out. Such life insurance arrangements are most commonly made in tandem with mortgages, as found here.

If this is not the case, it is your responsibility to contact the lender to whom you owe the debt and rearrange the repayments so they are no longer coming from the deceased’s estate and instead solely from your funds. If this added financial burden will supersede your income, InControl could help you manage your debts and talk to the lender on your behalf with the intention of freezing any interest or additional charges.

Individual Debts

Individual debts are most often taken out of the deceased’s estate – the money or assets left behind. This can complicate matters, particularly when there are multiple beneficiaries of the estate. It is the responsibility of the executor of the estate to ensure that all debts are addressed before the value of the estate is split accordingly between all beneficiaries.

It may be necessary to sell off assets, such as the deceased’s home, to repay these debts. However, if the total value of the estate is not sufficient to cover the total costs of the debts, these often go unpaid and the responsibility of repayment dies with the debtor.

If the deceased has numerous sources of debt and the totality of the estate can only pay a fraction of this debt, the executor should talk to a probate specialist to determine which debt repayments should be prioritised and act on their advice.

If you require more information about repaying the debts of a loved one, call the InControl debt experts on 0800 072 6623.