What happens to my husband’s / wife’s / partner’s debts when they die?

Managing the estate of an individual who died with debts is a difficult and sensitive process that requires a high level of technical expertise. If your partner – whether that’s your husband, wife, or common law partner – has passed away leaving debts behind, you need to take specialist advice. There are rules and obligations around administering an insolvent estate and if these aren’t adhered to correctly, or errors are made, the executor (the person who has to deal with the debts – this is also often referred to as the ‘personal representative’) could be held personally liable.

At Begbies Traynor, we have a dedicated team handling Deceased Insolvent Estates which is the common term used in this scenario where the liabilities of a deceased individual’s estate exceed the assets. It is a complex situation which overlaps probate law and insolvency law and an adviser in this situation must have a strong understanding of both.

Dealing with a deceased insolvent estate

It isn’t easy being charged with handling the debts of someone who recently passed away. In some cases, it can come as an unwanted surprise that the debts even exist. Many people hide financial problems from the people closest to them and in the unfortunate circumstances where they die and leave these debts behind, it is left to others to pick up the pieces and deal with the legalities. That’s why it is incredibly important to take legal advice which we can help with – and we provide this through a completely free consultation.

There will be a number of options available to you based on the specific circumstances. The most common is an Insolvency Administration Order which effectively declares the deceased person bankrupt. This can either be applied for by the executor or the creditors of the estate (the people or businesses who are owed money).

Once the Order has been issued, the control of the deceased estate will be passed to a trustee who will manage payments to creditors in order of priority:

• Secured creditors – such as mortgages and debentures
• Funeral costs
• Testamentary expenses – these are costs incurred by the executor as a result of administering the estate, such as legal fees
• Preferential creditors
• Unsecured creditors – such as car payments, gas and electric bills
• Interest due on unsecured loans
• Deferred debts – such as  loans between family members

All debts would be paid in order – so secured creditors come first, then funeral expenses, and so on. Once the money runs out, any remaining debts would be written off.

For free, specialist advice on a deceased insolvent estate, you can speak to a member of our team today. We provide industry-leading advice on all matters relating to deceased estates and bankruptcy.