Among Friends

[Paul_Pedant]

Nice to be here. I'm about to search the forums for the following topics, but if anybody has immediate certain knowledge I would be grateful to hear it.

My immediate problem is that a relative died (intestate) with no assets and about 15 unsecured loans and credit card debts totalling £50K.

• Do these debts die with him?
• Is there a form of words I can use to tell debtors to give up?
• Does his spouse have to get letters of administration for a zero-value estate?

There is also a house (also with debt secured on it) which was held as "Joint tenants" with his spouse. My understanding is that the house is hers and cannot be taken for the estate (although the secured debts go with it). Is this correct?

[enaid]

Re: Among Friends

Hello Paul and welcome to Beagles.

If you were ‘joint tenants’, you owned the whole property together and the deceased person's share passes automatically to you.
But even though it's now in your estate, you can't ignore the debts. Creditors can apply for an 'Insolvency Administration Order' within five years of the death. This can have the effect of dividing the property in two and can force a sale. So it's in your interest to try to come to an agreement with people who are owed money, and try to pay them yourself.

If the mortgage lender required life insurance this may pay off the full amount of the loan. If there isn't any insurance - or if there were second mortgages not covered by insurance - the property may have to be sold.

I do believe that any 'unsecured ' debt that is in the deceased persons name only can be collected from the deceased persons estate, before it goes to any beneficiaries.

I would imagine with the debt being so great that all the companies involved would need absolute proof that this persons estate was zero value.

Am sure you will get more response to your post but hopes this helps for now.

[Amy]

Re: Among Friends

Credit cards and unsecured loans will appear quite a long way down the pecking order of debts to be paid from a deceased's estate.

Once the credit card companies are informed of a death they may wish to make a claim on the estate, but as he left no assets it would appear they are out of luck.

Did any of his credit cards have PPI cover?

Was the loan that is secured on the property also in his name only?

[Paul_Pedant]

Re: Among Friends

Encouraged by two replies although they have slightly different views. Thank you both.

I should have explained more fully, so I will try now. My brother-in-law Don died (intestate) in January. His widow Kay has no computer and no aptitude, and is overwhelmed with stuff, so I am trying to help her start all over again with advice and writing the letters. (I believe if we go for letters of administration Kay has to apply herself, or give someone like me Power of Attorney.)

Don was ill for some years and critical for last 15 months and they have borrowed short and long term to live. There was about £1K in Don's own bank account which we used by asking the bank to part-pay the funeral (first call on the estate). There are no life insurances or other assets. There are four kinds of debt here.

• They had a house (in Joint Tenancy) which had a first and second mortgage in joint names secured on it. I believe Kay gets the whole of the house, but the whole of these debts go with it.
• Kay has around £5K of unsecured credit card debt in her own name, which is unchanged and she will have to keep paying.
• Don had about £7k in unsecured loans and cards which were insured.
• Don owed around £39K in his own sole name, unsecured and uninsured. Mix of credit cards, sold-on mortgage arrears, and bank loans.

It's the last category that I need advice on most. I know that debts do not die with the deceased - they should be settled from the assets of the estate before the other distributions can be made. (I did probate for both Don's parents in the last 10 years.)

However, I believed (until yesterday) that the estate had zero assets and £39K liabilities, and that those lenders knew the risks with unsecured loans and should expect to lose their shirts occasionally. I came to LegalBeagles looking for the best way to tell them so with minimum disclosure, considering their vulture natures.

Now I have just looked up 'Insolvency Administration Order'. That seems to say that these creditors can (separately or in groups), apply to a court to get Kay to repay the £39K; and the court can force her to sell the house to do so (even though the debts were not secured on it and it is not legally part of the estate); and that any of them can do this anytime in the next 5 years that they feel like it (like when Kay sells the house because base rate goes up and she can't afford the interest any more).

Is it usual for creditors to use an IAO? How often do the courts uphold them? What is the point of an "unsecured" loan if it can be secured retrospectively and posthumously??

Some creditors have asked me to tell them about other creditors. Do I have to tell them? It might encourage them to launch a joint IAO and share costs, or it might deter them because of their share of the total debt being smaller. Should I think about the data protection act, privacy etc on Don and Kay's behalf.

For completeness, I have three other issues running with this.

(a) The second mortgage is very nasty. It runs until Don would have been 80, without consideration of how payments would continue. The lender was aware that repayments on the first and second mortgages would exceed 60% of net income even before retirement. Kay never had it explained to her what she was signing, or any of the implications. It has an APR of 17.4%. The loan has been transferred twice, without any notification that I can find. It is a hideous transaction. What are the changes of having it declared an unenforceable agreement?

(b) Don had a small annuity which he took early from a previous job. I can't figure if it's an asset of the estate. It is now paid to Kay. However, it's not a widow/dependent pension: it was set up as sole pension but with a ten-year guarantee. Does that mean the creditors can steal that too?

(c) Given the estate can't pay anyone anything, do I need to seek other creditors in the London Gazette, and throw away another £80?

Truly, the less you have, the more they want to take it away from you.

[enaid]

Re: Among Friends

Hi paul, the credit cards that Don held have you checked that there was no PPI on any of them. I am only mentioning this as they often put it on there without peoples full knowledge, if you have a statement you can see it would be helpful then you could be sure.
If there is any there then you could claim.

[Paul_Pedant]

Re: Among Friends

I'm pretty sure I identified the 5 loans (£7K) that had PPI and the 7 loans (£39K) which did not. Unbelievably, Kay says the CAB advised them to reduce their outgoings by stopping PPI premiums on the big balances, about 6 months before his terminal illness was diagnosed. The CAB also advised them to cash in all their life assurance, endowments and pension funds, to reduce the debt level they had to service. Worst advice possible!

I checked bank statements and credit card statements for insurance premiums being charged. (During this, I found "Policy Administration Services" who charge useless insurance premiums on mobiles you haven't got any more, for the rest of your life.)

I also wrote to all the creditors I could find, notifying them with a death cert, asking for a freeze on payments and 0% interest, and asking if they had other linked accounts and whether there was PPI. Also asking for copies of original agreements and assignments to DCAs. These are not being sent.

Also, Don was already claiming under PPI where he could, because of his long-term illness, so most of them just paid up the balance without question.

One weirdness I found is that when you write to a DCA, you get a reply from a solicitor you have never heard of who claims the debt is now repayable to the original creditor (who in some cases I also had never heard of). They even include business reply envelopes for the DCA who didn't reply, or in one case to a different DCA. How many names does a vulture need to hide behind?