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Dealing with debts after a death. The financial impact of bereavement

The death of someone close to you can have a devastating effect on several areas of your life. Not only does it effect you emotionally, it can take a real toll on your wellbeing, your plans for the future, and your finances. 

Bereavement often creates a lot of uncertainty around what happens to the person’s debts or assets when they die. We know that it's hard to make sound decisions when a loved one passes away. As with all life changes that you may encounter, we can provide debt help and support.

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Unsecured debts and death

If a person dies and leaves behind unsecured debts (finance like personal loans and credit cards) what happens to these will depend on whose name the debts were in and whether the person had any assets like investments, savings or a house.

If the debts were in their name only

If the debts were only in the name of the person who has died, then these debts will either:

  • be written off if the person didn’t have any assets, or
  • need to be repaid if the person has left an estate (this could be anything from savings to a share in a house).

If your husband, wife or civil partner has died and they had a debt that was in their name only, you won't become responsible for it.

If they left a will, any beneficiaries named in it will only receive their inheritance once funeral costs have been covered and debts have been repaid.

If the debts were joint with you or someone else

If you or someone else was named on the credit agreement that person will become responsible for repaying the full amount of the debt.

A credit card will only ever be in one name but your credit card provider may have allowed you to have a second card for your partner or someone else to use. If someone else's name is attached to the card, they'll be a second card holder. In these cases the second card holder won't be responsible for paying any of the debt spent on either card.

A few points to remember about bereavement and money

  1. When someone dies, it's important that you notify their creditors about the situation. Write a letter to explain whats happened and let them know you'll be in touch later to find out what else needs doing. Creditors are normally sympathetic as long they're kept updated.
  2. A person's estate is made up of any money they have in bank accounts or savings, any assets they have (like cars, caravans, antiques or jewellery) and any property they own. This could include a house that's in their name or one that's jointly owned with someone else.
  3. Always check to see if the deceased person’s debts are covered by a life assurance policy (which might repay a mortgage), personal protection insurance (which might cover loans or credit cards) or if they’re entitled to a 'death in service' payment from a pension or employer (which would provide a lump sum of money).

How is a deceased person's estate handled?

A person’s estate is made up of their money (including any insurance pay outs), investments, any property they own (or jointly own) and their possessions.

The money in their estate will be used to cover any funeral and administration costs first. If there’s any money left after this it'll need to be paid towards any debts the person had.

In some situations if there's money tied up in a property the creditors could ask for the house to be sold and the money repaid from the sale. If you don’t want the house to be sold then you would need to come to an arrangement with the creditor to repay the debt at a rate you can afford.

Most unsecured creditors will normally write off a debt (like a personal loan or credit card) if there's little or no money left when a person dies. They’ll normally only pursue the debt if there’s a large estate.

Free and confidential debt advice whenever you're ready

If you're dealing with debt after the loss of a loved one, please know that you're not alone. Over 20 years we've helped thousands of people across the UK deal with their debt problems. We'll do all we can to support you and help you get things back on track.

Our online advice tool Debt Remedy can help you put together a personal action plan in around 20 minutes. Alternatively, our team of advisors can go through your budget over the telephone and recommend a debt solution that's most beneficial for you. 

Who are we?

  • UK's leading debt charity
  • Over 20 years' experience
  • Free, impartial advice & managed debt solutions

How we help

Helping you become debt free...

“I wish to thank your staff for all the great help they gave me when I was in so much debt.
They were a pillar of support to me.” (Leslie, Essex)

Foundation for Credit Counselling Wade House, Merrion Centre, Leeds, LS2 8NG trading as StepChange Debt Charity and StepChange Debt Charity Scotland. A registered charity no.1016630 and SC046263. It is a limited company registered in England and Wales (company no:2757055). Authorised and regulated by the Financial Conduct Authority.

*This is the average rating of our service based on the StepChange reviews on Feefo by DMP and DRO clients three months into their solution.

© StepChange Debt Charity 2017