debt & death

If you have been diagnosed as having a terminal illness, it is always worth contacting your creditors and explain to them your situation. While they have absolutely no obligation to do anything, I personally know of examples where debt has been written off in these situations. If you can’t bring yourself to talk to them over the phone (this is very common), then you can write them a letter – make sure you send it recorded.

There has been a recent case which was widely reported, when Matthew Smith, a man with terminal lung cancer, decided to withdraw his pension early in order to repay his debts so that he was clear when he died. However, the Department of Work and Pensions (DWP) stopped his benefits until he could prove that his pension had indeed gone on repaying his debts.

Mr. Smith said: ‘I drew my pension to clear my debts. Since I did that my Universal Credit has been stopped. This is my fourth month without any Universal Credit coming in. ‘I have paid my rent and I stocked up well with food but now the money is running out. I do not understand what the hold up is.
‘Surely there should be something in place where those that have terminal illness have applications fast tracked.’

He continued: ‘To be honest I am stressed to the max. I am running out of money. It is not fair. Nobody seems to know what they are doing.
‘The money that I spent out was meant to be for the funeral. I hoped whatever was left in the bank the family could use to bury me.’ He added: ‘I feel my body drifting away from me. I am not in a hurry to go but I feel myself slowing. I want to get this claim sorted so I know where I stand.’

This is obviously already an extremely stressful time, and dealing with someone else’s debt isn’t going to make it any easier. If you can, consult a solicitor. They can help and tell you exactly what needs doing, however this can obviously be costly.

If you are doing it on your own, the first thing you need is time. Try and inform all of the creditors as soon as you can. Explain to them that you are going through the legal process of dealing with the deceased’s estate and ask for proof of what is owed – most companies will be sympathetic in this situation, and allow you time to sort things out.

Next, you need to see if the deceased had any insurance that could help pay off some of these debts:

• A life insurance policy might be able to repay a mortgage
• Payment protection insurance could help repay loans and credit cards
• Employers may have a death in service payment that you can use

Debts must be repaid in priority order:

1. Secured debts – mortgage
2. Priority debts – income and council tax
3. Unsecured debts – utility bills, credit cards, loans, etc.