What happens to debt when you die in the UK

This guide explains who pays the debts of the person who died, which debts get paid first, what happens to specific debts such as a mortgage or a credit card, and what an executor should do to avoid becoming personally liable.

Who pays the debts when someone dies?

The estate pays the debts. The executor or administrator uses the money and assets the deceased left, the bank balances, the sale of the property, the investments, to settle what is owed before distributing anything to beneficiaries. Beneficiaries receive what is left after debts, tax and costs, which can be less than the will suggests, or nothing at all if the debts are large.

The person handling the estate does not pay the debts from their own money. They pay from the estate. Distributing the estate before the debts are settled is where an executor can get into trouble, which is covered below. For the full role, see our guide on executor duties.

Do your family inherit your debt?

No. This is the single most common fear after a death, and the answer for sole debts is that relatives do not inherit them. A son does not take on his late mother's credit card balance. A daughter is not chased for her late father's personal loan. The debt is the estate's, not the family's.

There are three situations where a living person does remain liable, and they are worth checking carefully.

Joint debts pass in full to the other borrower. If you held a loan, credit card or mortgage jointly, the survivor becomes responsible for the whole balance, not half of it.

Guaranteed debts fall to the guarantor. If someone guaranteed the deceased's borrowing, the lender can pursue the guarantor if the estate cannot pay.

Joint accounts and jointly owned property carry their own rules. A joint bank account passes to the survivor with any overdraft attached, and a jointly owned property can carry a shared mortgage. See what happens to a joint mortgage when one partner dies.

Which debts get paid first?

Debts are paid in a set order, and it is not first come first served. Getting the order wrong can make an executor personally liable, so it matters.

Reasonable funeral costs and the costs of administering the estate come first. Secured debts, such as a mortgage on the deceased's property, are next, usually settled from the sale or transfer of the asset they are secured against. Unsecured debts, such as credit cards, personal loans, overdrafts and catalogue accounts, come after that and share whatever remains.

Where an estate can pay everything, the order rarely causes a problem. Where it cannot, the order decides who gets paid and who does not, and it must be followed precisely.

What happens to specific debts

A mortgage is a secured debt tied to the property. If the property passes to someone, the mortgage usually has to be repaid, refinanced or taken over. A sole mortgage is repaid from the estate, often by selling the home. Some people have mortgage life insurance that clears the balance on death, which is worth checking early.

Credit cards, personal loans, overdrafts and buy-now-pay-later balances are unsecured debts of the estate. They are paid from the estate's assets after funeral and administration costs, and any shortfall is written off. Relatives are not asked to make up the difference on sole accounts.

Car finance depends on the agreement. On hire purchase or a personal contract purchase, the car is not fully owned until the finance is cleared, so the estate either settles the balance to keep the car or returns it to the finance company.

Utility and council tax arrears are debts of the estate. Ongoing bills on an empty property continue until the account is closed or the property is sold, which is why closing accounts promptly matters. See what happens to bills when someone dies.

Student loans in England and Wales are written off on death. The estate does not repay them, and the family is not pursued.

What happens if the estate cannot pay the debts?

An estate that cannot cover its debts is insolvent, and it is handled differently. When an estate is insolvent, no beneficiary receives anything, and the debts are paid in the strict statutory order until the money runs out. Creditors lower down the order receive a share of what is left, or nothing, and the shortfall is written off. Nobody inherits the unpaid balance.

If you suspect an estate is insolvent, do not pay any debts or distribute anything until you understand the full picture, and take advice. Paying one creditor ahead of another in the wrong order, or paying a beneficiary before the debts, can leave you personally liable to make good the difference.

What executors should do about debt

Establish the full list of debts before paying anyone or distributing anything. Write to every lender, card provider and utility for a date-of-death balance, and check the deceased's post, emails and bank statements for regular payments that point to a debt you did not know about.

Protect yourself with a deceased estates notice. Placing a notice in The Gazette and a local newspaper gives creditors two months to come forward. If you distribute the estate after that period and a new creditor appears, you are protected against having to pay them from your own money, provided you followed the process.

Do not rush the distribution. Most executors wait at least six months from the grant of probate before paying beneficiaries, because it allows time for debts and any claims against the estate to surface. What the grant is and when you need it is covered in what is probate.

What happens to a mortgage when someone dies?

A mortgage is a secured debt that has to be dealt with when the borrower dies, and what happens depends on whether it was in one name or two. A sole mortgage is repaid from the estate, usually by selling the property or by a beneficiary who inherits the home taking on a new mortgage. The lender does not simply write it off.

A joint mortgage passes to the surviving borrower, who becomes responsible for the full repayments. Many mortgages are protected by mortgage life insurance or a decreasing term policy that pays off the balance on death, so check the paperwork for a policy before assuming the home must be sold. Where the property is kept, the lender may agree to transfer the mortgage or offer a payment holiday while the estate is sorted out. See what happens to a joint mortgage when one partner dies.

Can debt collectors chase the family?

No. Debt collectors cannot pursue relatives for a deceased person's sole debts, and they must deal with the estate through the executor or administrator. If a collector contacts a family member directly, tell them the person has died, give them the executor's details, and send a copy of the death certificate. That moves the matter to the estate, where it belongs.

Aggressive or repeated contact after you have notified a creditor of the death is not acceptable. Lenders and collectors follow specific standards for dealing with bereavement, and you can complain to the Financial Ombudsman Service if a firm keeps chasing a relative for a debt that is the estate's responsibility.

How debt reduces the inheritance

Debts are paid before beneficiaries, so they reduce what the people named in the will actually receive. A will might leave a fixed sum to one person and the remainder to another, and where debts are large, the remainder can shrink to nothing while the fixed gift is still paid. Where the estate cannot even cover the fixed gifts, those gifts are reduced too, in a set order.

This is why an executor establishes the debts before promising anything to beneficiaries. Telling a beneficiary they will receive a set amount, then having to claw it back because a debt appeared, is avoidable with proper checks.

Debts people forget to check

Beyond the obvious cards and loans, several debts are easy to miss. Overpaid benefits or tax credits can be reclaimed by the DWP or HMRC from the estate, and an overpaid State Pension for the period after death is recovered as well. Unpaid income tax up to the date of death is a debt of the estate, so a final tax position often needs to be agreed with HMRC.

Care home fees, guarantor agreements the person signed for someone else, and hire purchase on a vehicle are all commonly overlooked. Check the deceased's correspondence and standing payments for any of these before you treat the debt picture as complete.

Finding every debt without chasing each lender

Debts hide in the same places as accounts: an old card, a finance agreement, an overdraft, a utility account on a property nobody is living in. Building a complete picture means contacting every provider the person dealt with, and doing it one letter and one phone call at a time is where the weeks go.

Legacy Trail finds the accounts and services the person held and notifies them centrally, so you can settle the estate accurately without spending weeks tracking down every lender and provider yourself.