Impact on debt solutions already in place

Impact on debt solutions already in place

• Insolvency
• Debt Payment Programmes
• Creditors

Insolvency

If the deceased was in bankruptcy or a protected trust deed and the trustee has not been discharged, the trustee will wind up the estate. They can cash in any life policies belonging to the deceased and use them to pay outstanding debts and costs of winding the estate up. The trustee has a legal responsibility to pay the funeral and deathbed expenses, but their fees and expenses get priority treatment for payment from the estate.1s129(1) B(S)A 2016

 

1     s129(1) B(S)A 2016 »

Debt Payment Programmes

Under the Debt Arrangement Scheme, the Debt Payment Programme (DPP) is revoked on the client’s death.1Reg 14 The Debt Arrangement Scheme (Scotland) Amendment Regulations 2013 All interest, penalties, charges and fees are reapplied and must be dealt with by the executor. If the client was in a joint DPP, it will be revoked, the revocation will have no effect for 14 days. The partner in the joint DPP must apply for a new DPP, but only for the debts for which they are liable.

 

1     Reg 14 The Debt Arrangement Scheme (Scotland) Amendment Regulations 2013 »

Creditors

Creditor’s need to be contacted to inform them of the death, and to reduce the stress of creditors demanding payment on the deceased’s family. They must be informed that the client is going through the legal process of dealing with the person’s estate. Good practice is to send a copy of the death certificate to all creditors.

A creditor owed over £5,000 can apply for the sequestration of the deceased’s estate by petitioning the court.1s7 B(S)A 2016 Unless the apparent insolvency of the deceased was established four months prior to death, the creditor must wait six months after the death of the person before they can present a petition for sequestration.

 

1     s7 B(S)A 2016 »