Repayment of Loan - After Death

A extended family member died recently and had an outstanding loan with a financial institution (Not a Mortgage and not insured as far as I am aware).

The loan is quite substanial and is being paid off every month from a joint account and continues to be paid. This loan is for land, however there is no mortgage and other joint account holder has nothing to do with the land or loan. There is though some form of personal guarentee from the deceased for a certain part of the loan (Not the total though). The joint account holder would be entitled to the deceased estate.

His immediate family are recieving some rather unpleasant letters from the financial institution and its in the hands of their solictor. They though are also not really saying what it means.

The letters from the financial institution are stating they intend to 'recover' the loan amount from the deceased estate. Anyone know what the legal position is on this? I did a quick search though the site and could not see anything on this type of thing. The intention of the family seems to be that would continue to pay of the loan if possible. Would the bank take the land and sell for any price and then outstanding owed taken out of the estate that would be due to family?

If for example the amount owed on the loan is 10k, the value of the land is 7k and the deceased estate is worth 8k, what would happen?

Hope the above makes sense. Its confusing for me who is fairly up to date on these type of things, so you can imagine the family don't know what is means.

Debts don't die with the deceased. So, can we assume that everyone accepts that the debt is due?

If there are assets in the sole name of the deceased, then those assets are available to a creditor.

Maybe the best thing to do is to see what the estate is worth, see if the debt is actually due and then seek to do a deal with the bank?

mf

mf1 said:

Debts don't die with the deceased. So, can we assume that everyone accepts that the debt is due?

If there are assets in the sole name of the deceased, then those assets are available to a creditor.

Maybe the best thing to do is to see what the estate is worth, see if the debt is actually due and then seek to do a deal with the bank?

mf

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Thanks for the reply, I dont think there is any confusion around the fact the debt is due, however can the loan not be continued by the family as per the current terms? The fear is that land will be taken and sold for pittance and taken from the balance of the loan, with the remainder taken from the estate. This seems to be a common theme and from reading the correspondence, the intention.

Also what happens if the value of the estate is not worth the same as the outstanding balance of the loan. Can the family be persued for it?

Hi pele

The deceased owned some land - an asset.

He owes some money a liability.

The executor cannot transfer the assets out of the estate - he must use them to pay the loan.

You should arrange to meet the financial institution. They would probably give a loan to someone else to repay the deceased's loan. This loan would be secured on the land or on some other property if available.

If the deceased's liabilities exceed his assets, the assets will be sold and used to pay as much as possible to the creditors - presumably the financial institution in this case.

But it's best to try to avoid a legal case. The executor should meet with the bank and try to come to an agreement.

Brendan Burgess said:

Hi pele

The deceased owned some land - an asset.

He owes some money a liability.

The executor cannot transfer the assets out of the estate - he must use them to pay the loan.

You should arrange to meet the financial institution. They would probably give a loan to someone else to repay the deceased's loan. This loan would be secured on the land or on some other property if available.

If the deceased's liabilities exceed his assets, the assets will be sold and used to pay as much as possible to the creditors - presumably the financial institution in this case.

But it's best to try to avoid a legal case. The executor should meet with the bank and try to come to an agreement.

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Thanks for the reply Brendan. At least now I can explain it to them in plain English. I am sure it will work itself out.

Cannot fathom out why their own solicitor didn't tell them the situation?

No if the estate is not enough to pay the loan the family will not be liable for it. But it would not be wise to stop making payments on the loan as it would lead to more debt via interest, bank penalties and interest on interest no doubt.

Hi Bronte

In many cases, clients find it difficult to understand professionals such as solicitors as in many cases, professionals are not good at explaining things.

But it would not be wise to stop making payments on the loan

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I think you should stop making payments on the loan until the matter is clarified. It seems to me that someone with no liability for the loan is making payments on it. If the estate is in deficit, then all they are doing is reducing that deficit.

Brendan

Bronte said:

Cannot fathom out why their own solicitor didn't tell them the situation?

No if the estate is not enough to pay the loan the family will not be liable for it. But it would not be wise to stop making payments on the loan as it would lead to more debt via interest, bank penalties and interest on interest no doubt.

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Brendan Burgess said:

Hi Bronte

In many cases, clients find it difficult to understand professionals such as solicitors as in many cases, professionals are not good at explaining things.


I think you should stop making payments on the loan until the matter is clarified. It seems to me that someone with no liability for the loan is making payments on it. If the estate is in deficit, then all they are doing is reducing that deficit.

Brendan

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From what I can gather the solictor has explained it to those concerned but it wa quite a vague explanation. It still very early days as the man is only deceased over six weeks, I think it's more the threatening tone of the letter so soon that has caused a bit of panic.