What happens to your debts when you die?

by StepChange Debt Charity on 21 May 2012  |  12 comments
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Debt doesn't disappear when you pass away.

We recently came across this story from broadcaster Danny Baker, who was diagnosed with throat cancer a couple of years ago (he’s now fully recovered) but had no relevant insurance and not enough money saved to cover his bills during his illness.

Danny was lucky enough to be able to call on his friend and fellow broadcaster Chris Evans, who lent him £30,000 to cover his essential bills at a frightening time in his life.

We’re not all lucky enough to have a friend like Chris who can step in at a time of real crisis. Our Helpline deals with callers from all over the UK in all different kinds of financial dire straits, sadly including those who are fighting illnesses.

Difficult time

It’s heart-breaking to find out that you have a serious (and perhaps terminal) illness, but this is only made worse by the devastating loss of income and/or lack of necessary insurance to cover you during this difficult time.

To help cope with this loss of income we make sure clients are claiming all the benefits that they are entitled to. We have a dedicated Welfare Benefits department that exists for this very purpose.

However, the harder job can be to stem the expenditure.

Even though it may seem like it, creditors aren’t being monstrous; they just need to be fully informed of your situation so that they can come to some form of arrangement with you. They can’t do this if they haven’t been told about what’s going on.

Health and family are more important

It's human nature to bury your head in the sand when it comes to creditors. After all, dealing with your health and your family are more important.

Our counsellors sometimes deal with people with very serious health conditions who are under the impression that once they die any debt they have will be written off.

This isn’t strictly true - if you leave no money or assets then the creditor has little choice but to write off the debt. However, if there’s an estate left behind creditors can and do make a claim to recover any money left outstanding by the deceased.

Upsetting time

What can be even more upsetting to explain is that any joint debts would now need to be repaid in full by the other person. It is very painful for some clients to realise that after they die they are leaving living loved ones with unmanageable debt. It means that, after a relative’s death, we offer help and support to a lot of families.

Finally, one of the many misconceptions surrounding debt is that those who find themselves in debt have done so from overspending or living recklessly beyond their means. However, life shocks such as death and illness are much more likely to cause problem debt. We’re here to manage this worry, at a very stressful time.

If you’re worried about your level of debt, or are trying to cope with debt in the aftermath of a death, you can always use our online debt counselling service Debt Remedy to find a solution to your situation quickly. If you’re worried about your level of insurance consult lovemoney.com’s life insurance comparison service.