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Debts - reaching beyond the grave
14 September 2018  | Marié Combrink

Many people worry about what will happen to their debts after they die. Often, they are concerned that their family members will be responsible for paying off their debt.

Let’s first understand what a deceased estate is.  All the assets, income and liabilities of the person who passed away is known as the deceased estate. Note that the deceased estate is just a legal term and not a person. Therefore the estate is vested in the Master of the High Court and an executor or executors are appointed by the Master of the High Court to manage or handle the estate.  

What is the role of the executor? The executor after being appointed to manage or handle the estate has three main tasks to complete:

1.     Collection of all the assets and then to liquidate the liabilities of the estate, where after the

         balance (assets minus liabilities) are distributed to the appointed beneficiaries.

2.     The executor for the duration of the process also takes on legal guardianship over the assets.

3.      Note that the executor is not liable for the debts of the estate but is only the legal

          representative of the estate.  This also means that the executor in his appointed capacity

          can proceed with legal action to collect outstanding debt on behalf of the estate and due

          and payable to the estate.

Let us go back to the original question  - What happens to your debts after you have died?

It all depends on whether:

·         there are any assets which includes money or property, remaining in the estate that can be 

          used to pay of debts;

·         the debts are secured or unsecured;

·         the debts are only in the deceased’s name, or in joint names with another legal person;

·         the debts are guaranteed by someone else.  

The executor has to, as soon as he/she is appointed, cause a notice to be published in the Government Gazette and in newspapers calling upon any creditors to come forward and lodge the claims against the estate.

·         If there is enough money available in the estate, the executor sees to it that the debts owed to

          those creditors are paid from the money available in the estate;

·         If there is not enough money (cash) available in the estate, the executor can sell property and

          use the money from the sale to pay these debts;

·         If there is not enough money in the estate after all the assets are sold, the estate can be 

          declared insolvent.

Other people are only responsible for paying the debts of the estate if:

·         the debt is secured against a particular asset owned by someone else;

·         the debt is in joint names with someone else, for instance a spouse to whom the deceased

          was married to in community of property;

·         the debt was guaranteed by someone.    

The difference between secured and unsecured debts ·        

*      Secured debts – This is a debt that is secured against a particular asset. When a bank lends

        you money, they may take security for the debt.  For example, if you have a mortgage loan at

        a bank, your house is security for repayment of your home loan.  If you stop paying your

        home loan.  If you stop paying your home loan, the bank can take your house and sell it to

        pay off the debt.

*      Unsecured debts – With these debts, if you stop making repayments, there is no secured

        asset the bank can take and sell. The bank must go to court and follow the normal debt

        collection procedure to collect the debt. Credit cards, clothing store accounts or personal

        loans are examples of such unsecured debts.  

How are these different debts recovered after death?  

Secured debts

If you have an outstanding loan when you die, which is secured against an asset owned by you, the lender can take that asset if repayments on the loan stop. The estate may lose the asset if for instance the secured loan is in joint names and the co-borrower cannot maintain monthly payments, the property may be repossessed by the creditor.

Debts in joint names

If you have a debt in joint names, for example a credit card debt, then everyone whose name is on the account is responsible for the debt. If one account-holder dies, their estate may be used to pay off part of the debt or the joint account-holder will be responsible for the whole debt.

Guaranteed debts

When you have a loan and someone else is bounding themselves as surety or guarantee to continue repayments if the borrower stops making them, that person can be held responsible for making repayments if the estate is not able to cover the payment.  

The person appointed as executor in handling your affairs after you passed, with the proper knowledge is very important in light off the above. Make sure your will is in order and you know the executor appointed will manage your estate in the best possible manner.  

Reference / Sources

Boedelbereddering – Praktiese handleiding (Wiechers Vorster)  

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