What happens to debt when you die?
Many people will die with debt. But what happens to that debt when they die? Read on to explore what happens to debt after death, and how you can help protect your family from financial hardship if you have debts when you pass away.
Debt after death – how it works
Although your debt doesn’t pass to your next of kin when you die, it could impact your family’s finances. Who pays the debt and how it’s treated depends on the type of debt you have, whether it is a joint loan or taken out individually, and how much your estate is worth.
Here are the key facts to know:
- Individual debt, like a credit card or overdraft, is paid off by your estate. Any remaining money after the debts are settled will then go to your beneficiaries. If there are insufficient funds in your estate to pay all your debts, the estate is considered insolvent, and any remaining individual debt is likely to be written off by the lender.
- Joint debt is typically passed to the surviving person when one borrower dies. This includes debts like a mortgage taken out with your spouse, for which the survivor becomes responsible in full.
- If you’ve signed security as a guarantor for someone, you could be liable for that debt if they die, if there’s not enough money in the deceased person’s estate to cover it.
Taking out life insurance can be a good way to ensure there’s enough money to pay outstanding debts when you die, while leaving your loved ones financially secure.
People in the UK owed a staggering £1,900.3 billion at 30 April 2025, according to the Money Charity, with an average household debt of around £66,910. Not only that, around 7 million UK adults have fallen behind on their household bills, reports the Money Advice Trust. So, although people tend not to talk about debt, it’s important to think about what would happen to your debt if you died.
Some people think their debt dies with them. Others believe their next of kin inherit their debt. Although neither of these statements is true, your debt could affect your family’s finances when you die.
Unfortunately, debt doesn’t simply vanish or get written off when you die. Who pays it off, and how it’s paid, depends on the type of debt and how much money you have in your estate. Your estate is everything you own, like your house, your car, and any savings or investments.
The executor of the will, or the administrator if there’s no will, is responsible for dealing with your debt along with your other finances. As a general rule, debt that’s in your name only will be paid off by your estate. Debt that’s in joint names will pass to the other person to continue paying.
If you have some life insurance, it can go towards paying off joint or individual debts when you die.
What happens before the estate is shared?
Only once all individual debts have been paid, and costs such as solicitors and funerals have been taken into account, will beneficiaries receive what’s left of the estate.
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Is there a difference between individual and joint debt?
Yes, there is. If you die with debt, how it’s treated and who pays it depends on the type of debt you have.
Individual debt: Debt that’s only in your name – called individual debt – is paid off by your estate. For example, you might have a credit card balance or a personal loan. When you die, debts like these are paid first from your estate. Anything left over from your estate is passed to your beneficiaries. If there’s not enough money in the estate to pay off the debt, the debts are then likely to be written off by the lender.
Joint debt: If you have joint debt with another person, like a mortgage or a joint credit card balance, then the full debt is passed to them when you die. They’ll need to carry on paying it themselves. If they might struggle to make the payments, it’s a good idea to speak to the creditor or lender to explain what’s happened. They might be able to arrange a payment plan that’s a bit cheaper.
Mortgage debt: Most people’s biggest debt is their mortgage, and many people have a shared mortgage with a spouse or partner. How this debt is dealt with when one person dies depends on how your property is owned:
- If you’re joint tenants, both of you own the whole property. If one of you dies, the property passes to the other one. So it’s not part of the estate, but the surviving partner will need to continue to pay the mortgage payments themselves.
- If you’re tenants in common, you and your partner each own half of the property. If one of you dies, their share doesn’t automatically pass to the surviving partner. Instead, it goes to whoever they’ve named in their will. Their portion becomes part of their estate and could be used to pay any debts, potentially requiring the property to be sold to pay those debts.
You might want to consider mortgage life insurance, which pays off your mortgage balance if you die, so your family won’t need to worry about losing their home.
Check how your property is owned
If you’re not sure if you’re joint tenants or tenants in common, for a small fee you can find the information at HM Land Registry for England and Wales, at Registers of Scotland for Scotland, or at the Land & Property Services’ Land Register for Northern Ireland.
What if you’ve signed as a guarantor for a loan?
When you sign as a guarantor for a loan, you’re guaranteeing to pay the loan if the individual can’t make the payments. Parents, for example, often sign as guarantors for their children to help them take out a mortgage or rent a property.
If you’re a guarantor for someone who has died, you’ll then become responsible for the loan if the estate can’t pay the debt. So becoming a guarantor isn’t something to enter into lightly.
Who deals with your debt when you die?
If you have a will, you’ll have chosen someone to manage your estate – often a trusted family member or partner. If you don’t have a will, someone can apply to represent you and administer your estate.
The executor or administrator of your estate will be responsible for managing your debts if you die, along with your other finances. Being an executor or administrator doesn’t mean they are responsible for paying any debt. They arrange for the debts to be paid from your estate.
However, there are some risks to being an executor, particularly if there is debt that isn’t known about. If a creditor (someone who is owed money) comes forward after the estate has been fully paid out, the executor could even end up being liable for the debt. To help avoid this, it’s recommended that they place a deceased estates notice in The Gazette and a local newspaper. They should leave at least two months from the date of the notice to give people time to apply with their claim.
If the estate is very complex, it can be a good idea to appoint a solicitor to deal with it. This cost can be paid from the estate.
It’s a common misconception that you can inherit debt, but in reality, your family won’t become responsible for your debt if you die. Any individual debt you leave, like a credit card balance or an overdraft, is paid out of your estate. If there’s not enough money in your estate to pay it all off, individual debt still doesn’t pass to your family – it’s likely just to be written off.
The only time someone else would be liable for your individual debt is if they’ve agreed to be a guarantor and there’s not enough money in the estate to repay the loan.
However, there are times when debt does pass to your loved ones. If someone else has co-signed for a loan, like car finance or a mortgage*, then the full debt would pass to them. The same applies if you have joint names on outstanding bills, like energy bills or credit cards.
*How mortgage debt is dealt with when one person dies depends on whether you’re joint tenants or tenants in common. See our section on ‘Is there a difference between individual and joint debt?’ above for more on this.
If there’s not enough money in the estate to repay all the debts, as well as other costs like funeral expenses, the estate is insolvent. This means that all the creditors who are owed money probably won’t be paid back. An insolvent estate also means there’s not going to be any money left to go to the beneficiaries, as all debt is paid first.
If your estate can’t cover all of your debts, debts are paid off in a particular order. If there’s more than one creditor in any category, the money will be split between them.
Here’s how it works:
- Secured debts are repaid first. This is debt that’s secured against an asset, like your home or vehicle. So this would be things like your mortgage or a car loan.
- Priority debts are paid next. These include outstanding income tax bills or Council Tax.
- Unsecured debts, like credit card balances, unsecured loans, overdrafts and utility bills, are the final debts to be repaid.
Once this process has been followed and the money has run out, the executor will contact the creditors to let them know the estate is insolvent. If the remaining debt is unsecured individual debt, like a credit card balance, the lender will typically write off the debt.
Yes – life insurance can go towards paying off debt when someone dies, helping to protect loved ones from financial worries. If you pass away during the term of your life insurance cover, your insurer pays out a specified sum of money to your nominated beneficiary. Your beneficiary can be anyone you choose, although most people nominate their spouse or partner. This money can be used to help pay off debt, like your mortgage or other bills.
There are lots of different types of life insurance, like level term insurance or death in service benefit through your employer. Payouts from these policies can all be used to help repay debt. Mortgage life insurance is specifically aimed at paying the balance on your mortgage if you die, ensuring your loved ones won’t lose their home at a very difficult time.
Does a life insurance payout become part of your estate?
This depends on whether or not you put the policy into a trust. If your policy hasn’t been put into a trust, the life insurance payout will form part of your estate. This means it could be exposed to inheritance tax, which is paid on estates totalling more than £325,000. It could also take longer for your beneficiaries to receive the money as it has to go through probate (the legal process of administering your estate).
If you put your life insurance policy into trust, it goes directly to your beneficiaries and doesn’t count towards your estate, even if you have debts.
No one wants those close to them to struggle with money worries and debt after they die. But even though debts don’t pass to family members, any debt you have can have an impact on your loved one’s finances after you die. This is because individual debts come out of your estate before anything is paid to the beneficiaries, and joint debts pass to the surviving debtor to be paid.
So it’s important to think about how to protect your loved ones. Here are some ways to ensure your loved ones don’t have to worry about debt after you die:
- Consider getting life insurance that will cover outstanding debts like the mortgage as well as other costs your family may have.
- Think about putting your life insurance policy in trust so it doesn’t become part of your estate, and to enable it to be paid out quicker.
- Remember to tell your loved ones you have a life insurance policy, and where to find it. It can be tricky to track down if they don’t know if you have a policy, or who it’s with.
Disclaimer: This information is general and what is best for you will depend on your personal circumstances. Please speak with a financial adviser or do your own research before making a decision.
Frequently Asked Questions
Does debt die with you?
Contrary to what many people think, debt doesn’t die with you. Instead, it’s paid off by your estate. After all debt has been paid, anything that’s left in your estate will go to your beneficiaries. If you have no assets, your estate is considered insolvent, and then any individual debts may be written off by the lender. Joint debt passes to the surviving person.
Can you be forced to pay off your spouse’s debts when they die?
If your spouse or next of kin has individual debts, like a credit card debt, then no. Their estate will pay off the debt. It won’t pass to you, even if there’s not enough money in the estate to cover it.
However, if a debt is jointly owned with your spouse, the full debt will pass to you if they die. You should contact the lender to remove their name from the debt, and can try to arrange better terms if you might struggle to make the payments.
What happens to benefit overpayments after you die?
If someone has died who was receiving individual benefits, it’s important to tell the Department for Work and Pensions (DWP) as quickly as possible. You can do this using the government’s Tell Us Once service.
If they’ve been paid too much, this will count as a debt and it will be repaid through the estate. If there’s not enough money in the estate to cover it, the debt will be written off. It won’t pass to their next of kin to be repaid.