No Will and High Debts: How to Decide Who to Pay?
Q.
My stepfather has died leaving debs of £8K on credit cards, there is only approx £2k left in his estate once the funeral expenses are paid. My mother is still alive and living in the marital home which is paid in full and jointly owned. How do we decide who we pay? There are 5 different credit cards all looking for payment? He died in Scotland without a will.
A.
Dealing with credit card debt is not something with which you wish to be dealing after the death of a loved one. This is made all the more difficult when the debt is unexpected, and when provisions have not been made for repayment.
First of all, it is necessary to dispel some commonly held myths. Many people think that debt is written off upon the death of the borrower. This is categorically not the case, as you have alluded to. Furthermore, many people think that liability for the debts will be passed on to the surviving spouse. In reality this is not always the case; this only occurs when the debt is held jointly.
As the property was held jointly and the mortgage has been paid off, your mother need not worry about losing her home. This will be passed directly to her and will not form part of the estate.
With regard to the outstanding £8,000, the situation will rather depend on whether or not the credit cards were held jointly. If they were, then your mother will have to assume responsibility for paying them off. A common way of doing this is to take out a new mortgage on the house for the value of the outstanding loans, and pay them off immediately. The monthly cost of the mortgage would be very low.
If the credit cards were only in your stepfather’s name, they will be subject to the usual rules regarding debt and intestacy. In these cases, secured debts will normally be paid off first. However, as all of the debts in question are (presumably) unsecured, they all have equal priority.
Most lenders have a department dealing solely with the death of debtors. You should contact each lender and explain the situation. In many cases they will freeze the interest and accept that the debts can be paid off as and when it becomes possible. However, some may refuse to do so. It is these debts that should be paid off first, as they will continue to cost your mother money every month until they are settled.
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