Debts are not discharged when a person dies. Where the liabilities exceed the value of the assets the estate will be insolvent.
Those administering an insolvent estate will not inherit the deceased’s debt, but they can become personally liable for those debts if they fail to follow the rules specifying how such debts are to be paid – so it is important to obtain legal advice as soon as possible.
The Administration of Insolvent Estates of Deceased Person Order 1986 (Insolvent Estates Order) sets out an order of priority as follows:
- Secured creditors
- Funeral expenses
- Testamentary expenses
- Preferential creditors
- Unsecured creditors
- Interest due on unsecured loans
- Deferred debts
If you find yourself dealing with an insolvent estate BBS can help you to identify the type of debts, when to settle them and how.