Dad died - unsecured loan + no equity in estate

[bilderberger]

Hello,

My dad sadly died last month. He had an unsecured loan with Natwest of around £9k, debts accumulated trying to help a family member.

 

His only asset of value was the home he shared with my elderly mum, the deed has him with my mum as joint tenants. I understand this means the home automatically becomes hers and the house is not technically part of his estate. This means the estate is insolvent. I understand there is some legislation that would mean its possible the bank could still pursue the value of dads share of the family home and force a sale.

 

Where does this leave my mum with the bank? I doubt they would write such a large amount off if they have options to pursue repayment. Mum could probably manage a settlement offer of around 30% of this amount but she doesnt have many resources and her pension income now dad has died will be greatly reduced; she's scared to lose the house.

 

I'd really be grateful to understand what options are open for her in this situation, if anyone has any insights.

[dx100uk]

its an unsecured loan, not a lot they can ever do.

send them a copy of the death cert .

 

[dx100uk]

In the event of death who's liable for an unsecured loan balance? - General Debt Issues - Consumer Action Group

[bilderberger]

Thanks - thats very helpful - the debt being written off would obviously be the ideal outcome, but i read an article (linked below) that describes how in the case of an insolvent estate a creditor can apply to the court to force the survivor to repay to the estate the value that the estate was depleted by when the joint tenancy passed the property to the survivor.

 

I'm not sure if this is only applicable to secured debts, or any debt.

 

Beneficial Joint Tenants, Survivorship and Creditors of (33bedfordrow.co.uk)

[dx100uk]

you need to confirm If it's a joint tenancy - then the deceased's half will pass automatically to the survivor free of debts.

 

If it's a tenancy in common, then the deceased's share goes into the estate and is an asset for the benefit of the creditors.

 

and who is dealing executor wise please?

 

[honeybee13]

Hi. I'm sorry to hear about your father, it's tough times for you.

 

Could we confirm if the loan is just in your Dad's name please?

 

If so, my OH was executor for someone in exactly this situation, joint tenancy house and outstanding loans in the husband's name. The house passed to the wife and both banks wrote off the loans because there was no spare cash in the estate.

 

HB

[bilderberger]

yes, its definitely joint tenancy - I checked that on the deed/land registry document.

 

The loan was only in dads name. My mum is the named executor on his will.

 

We're waiting for the final statement of affairs from the bank - presumably my mum as executor would then need to write to them with a statement to the effect that there are no assets in his estate. Is there a particular format this notification should take or any laws that need to be cited?

 

It would be a decent outcome if mum ends up debt free, this debt has been a millstone for them over recent years and it will be one less worry for her during her bereavement.

 

PS. thanks so much for the helpful replies all!

Edited April 30, 2021 by bilderberger
added PS

[honeybee13]

OH and I both used this website for advice when we were executors on different estates. Under their heading Insolvent Estates, they have suggested template letters. You could have a read of that.

 

They're sponsored by solicitors but we both rang them and there was no pressure to have a referral to a lawyer.

 

https://www.bereavementadvice.org/search/?query=insolvent+estate

 

HB

[BazzaS]

Just a note of caution.

There are two types of interest in an estate.

 

There is the 'legal' interest and the 'beneficial' interest.

The title held at the Land Registry will be the 'legal' interest and is ALWAYS a 'joint tenancy' You CAN'T register the legal title as a 'tenancy in common' - the Land Registry won;t accept it / won;t do so.

 

The  (very useful) summary from Bedford Row chambers quoted doesn't make this point directly, but is clear from its title .... the first word is 'Beneficial', and the article repeatedly  refers to beneficial ... espcially in footnote one.

 

So, my summary is:

a) don't look at the legal title at the Land Registry (LR)to tell you if the beneficial interest is held as a joint tenancy (JT) or as a tenancy in common (TIC).

The LR entry will always be a JT (and is the legal interest, not the beneficial one)

b) If the beneficial interest was a TIC, then the share from the deceased remains in the estate, [and the executors have to treat all claims on the estate with equal priority (though only in proportion to their value)]

c) if the beneficial title was as a JT the survivors hold the beneficial interest outside of the estate, and the executors of the estate don;t have to deal with the value of the house, BUT (as per the Bedford Row summary) if the estate is then insolvent, the recipient of the property could face a claim under Section 421A of the Insolvency Act 1986 (within the 5 year period stated in the Act.)

 

It doesn't mean the creditor would succeed, NOR be granted the whole sum if they did succeed,  but the advice here should reflect the risk rather than an absolute "don't worry, you are in the clear".

 

First thing to do? Establish the nature of the beneficial interest as either a JT or TIC.

Edited April 30, 2021 by BazzaS

[bilderberger]

Thanks for all the replies. 
 

I’ve double checked the nature of the beneficial interest and it is indeed joint tenancy (see pic). 
 

As @BazzaS has mentioned, that would suggest there is a risk the bank could pursue a claim, but presumably they would not do so without first trying to reach a settlement?

 

I am inclined to inform the bank of the fact that the estate is insolvent using one of the template letters linked earlier, and put the ball into their court to see what they say next. 

[bilderberger]

just wanted to come back and update this thread with the outcome.

 

So, I wrote a letter for my mum explaining that the estate was insolvent. We hadnt heard anything after nearly 8 weeks so she called a few days ago; the bank said on the phone that dads debt had been written off. Obviously I'd be more comfortable having this in writing, and she did request that, but not received anything yet from the bank. We did turn up another small debt of £200 or so for a Barclay card and have written the same letter to them, but also without a response - though they did write a rather aggressive "reminder" that the payments have been missed and that interest will be charged if the account isnt paid off.

 

Thanks for all the helpful advice here - I realize Natwest could have gone to court and possibly gone after the equity in the house even with a joint tenancy, but thankfully it seems they weren't ready to take that on and do it on this occasion. Hopefully we will get this in writing in due course, and I'll update this thread again if so. My mum is sleeping a little easier now

[honeybee13]

Hi.

 

It seems to be going in the right direction, well done.

 

Stick with it and don't let them walk all over you, please let us know how it goes and I hope you get something in writing soon.

 

HB

[dx100uk]

and don't blindly pay anyone without checking you should here 1st

 

dx

 

[bilderberger]

So they wrote a letter stating that they understand we say there is no money in the estate but that they want to complete their own searches of public records such as the probate registry to confirm this. They say this info is available to them nine months after the date of death. 
 

is this anything we should worry about?

 

is there anything that should be done from our side? Probate was not needed as there were basically no assets that were not jointly owned. 

[honeybee13]

Hi, how are you getting on?

 

I'd have thought if you've been straight with them, they can check but they won't find anything. AFAIK, the Probate Office only have information like wills they've processed.

 

See what other people think as well, I'm sure they'll be along later.

 

HB