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Some of our most common questions often centre around what will happen to debt in different scenarios. For example, what happens to debt when you die? We thought this week’s blog post would be the perfect opportunity to explain how debt is dealt with during specific periods and expose some of the myths that have circulated in relation to these topics.
This is often coupled with the question; will my debt get passed on to my relatives? Assuming the debt is in your name alone; when you pass away your debt becomes the responsibility of your estate. Your estate includes any property, monies and assets you leave behind and will first and foremost be used to cover your funeral costs and any debts that have been left unpaid. Any funds left after these deductions will go to your beneficiaries. If you don’t have an estate, or your estate isn’t enough to cover what is owed, your debts will be written off. This is all dependent that the debts belong to you alone – joint debts differ because if one party can’t pay or is not present to pay, the other party becomes responsible for the full amount.
…You move to another country?
A lot of people often ask this when returning from living abroad – is their debt still valid? Moving to another country does not mean your debts will disappear. Creditors can still chase you for the debt for as long as it remains unpaid – many creditors have partners in other countries to help retrieve money they are owed. Moving abroad is often not a permanent fix and even if your creditors haven’t chased you while being away, you are at risk of returning to the UK to a damaged credit file, interest charges, potential CCJ’s and charging orders against your property. How your debts are dealt with will depend on the creditor you owe the money to.
If you have been out of the country for a while, your debts might have become statute barred – which means creditors won’t be able to take legal action to ensure you repay your debts, they may still continue to chase you for payment however. Under the Statute of Limitation Act 1980 a creditor has six years to chase you for the debts you owe, if you don’t acknowledge the debt or pay anything towards it during this period you might be able to avoid repaying it. It is not advised you ignore creditors however as they could take you to court and register a CCJ against you. If you do receive a CCJ you will have to repay the debt, regardless of time period. Ignoring debts and missing payments will also have a negative effect on your credit rating. Furthermore the Limitations Act doesn’t apply to income tax so this can be chased for at any time, and mortgage lenders can chase their debts for up to twelve years.
…You get married?
Clients often worry about how their debt will impact their partner. We recently published a detailed blog post looking at marriage and debt but in short, marriage alone won’t link your debt with your partner. Only a financial association such as a joint account can join you and your partner together. Lenders might look at both partner’s credit files when making a decision about credit applications, and a partner’s poor credit history could impact their spouse’s ability to get credit in future, but your spouse will not become responsible for your previous debts.
If you are in debt and would like advice or help, please get in touch. All our advice is free and our advisers are more than happy to assist.