what happens to bounce back loan if i die

Losing a loved one is already a challenging moment to deal with, but amidst grief, one may also worry about the financial responsibilities left behind. What happens to Bounce Back Loan if I die becomes a pressing concern for many borrowers. The thought of burdening family members with loan repayment compounds the distress of loss.

Fortunately, there are measures in place to address this concern. In the event of a borrower’s passing or incapacitation after taking out a Bounce Back Loan, their estate might be eligible to request the loan’s write-off, easing the financial responsibility on surviving family members.

However, still navigating the specifics of these arrangements can still be complex and daunting. For a comprehensive understanding of the implications and available options regarding Bounce Back Loans in case of death, consult our detailed guide! 


Are Bounce Back Loans Repayable On Death? 

Yes, Bounce Back Loans must be repaid upon death. If the borrower passes away or becomes incapacitated, their estate might request the loan to be written off

Bounce Back Loans, like any other financial obligation, typically remain the responsibility of the borrower. When someone borrows money through a Bounce Back Loan scheme, they agree to the terms and conditions, including the repayment obligations.

If the borrower unfortunately passes away or becomes incapacitated, the responsibility for repaying the loan may fall on their estate. The estate, managed by the executor or administrator, handles financial matters after the borrower’s demise. It assesses the assets and liabilities left behind. If the estate lacks funds to repay the loan, it can apply for it to be written off. 

This involves proving the borrower’s death or incapacitation and demonstrating the estate’s financial incapacity to repay. Each case is reviewed individually, and decisions rely on the lender’s policies and regulations governing Bounce Back Loans.


Who will be held liable for an unpaid Bounce Back Loan after my death?

When considering the repayment of Bounce Back Loans after your passing, it’s essential to understand how your business structure affects the responsibility for settling these debts. 

Whether you operate as a sole trader or serve as a director of a limited company, it’s important to explore the specifics of each scenario to gain clarity on your potential obligations and responsibilities in managing these loans after your demise.


    • What if I’m a sole trader?

If you’re a sole trader, your business and personal finances are typically intertwined. This means that any Bounce Back Loans you’ve taken out during your business activities become part of your estate upon your death. 

Your estate, managed by your appointed executor or administrator, takes on the responsibility of settling outstanding debts, including the Bounce Back Loan. They’ll assess your assets and liabilities to determine how best to manage your financial affairs and ensure that any outstanding debts are addressed appropriately.


    • What if I’m a director of a limited company?

If you’re a director of a limited company, the situation regarding unpaid Bounce Back Loans is somewhat different. Limited companies are considered separate legal entities from their directors. 

As such, the company itself is responsible for repaying any Bounce Back Loans it has taken out, rather than the director personally. Directors have a legal obligation to ensure that the company’s financial affairs are managed properly. 

If the company is unable to repay the loan, it may face insolvency proceedings, and directors must act responsibly to address the company’s financial obligations while adhering to legal requirements.


What if there aren’t any assets or funds to pay for an outstanding BBL debt?


funds to pay for an outstanding BBL debt

In the unfortunate event that there aren’t sufficient assets or funds in your estate to settle your outstanding BBL debt after your passing, here’s what typically happens:

1. No obligation for survivors: 

Generally, your loved ones won’t be held personally responsible for your BBL debt unless they:


    • Co-signed the loan

When you apply for a BBL, you might require someone (a co-signer) to guarantee repayment if you default. This means the co-signer becomes equally responsible for the debt if you are unable to fulfil your repayment obligations.

For example, if you take out a BBL with your spouse as a co-signer and you pass away with an outstanding balance, your spouse becomes legally obligated to repay the remaining debt.


    • Were a joint account holder:

If the BBL is held in a joint account (e.g., with your spouse), the surviving account holder might become responsible for the entire remaining debt. This is because both account holders are generally considered equally liable for the outstanding balance.

For example, you and your business partner have a joint BBL for your business. If you pass away, your partner might be solely responsible for repaying the remaining BBL debt.

2. Debt Usually Written Off:

When a borrower passes away and there are no assets to recover the BBL debt, the lender incurs a loss. Since attempting to collect the debt from the deceased’s estate is often impractical and potentially expensive, the lender typically chooses to write off the debt.

This signifies that the lender acknowledges the debt as unrecoverable and removes it from their financial records. It doesn’t necessarily mean the debt disappears entirely, but it indicates the lender has stopped pursuing collection efforts.


Will my limited company be liquidated with a Bounce Back Loan debt?

No, your limited company’s status doesn’t automatically lead to liquidation solely because of an outstanding Bounce Back Loan debt after your death. 

The situation can unfold in different ways depending on certain factors:

1. Company solvency: If your company remains solvent (meaning it has enough assets to cover its liabilities, including the BBL debt), it can continue operating despite your absence. The company’s directors or appointed administrators would then handle the BBL repayments and other financial obligations.

2. Company insolvency: If your company is insolvent (meaning it cannot meet its financial obligations), the BBL debt might become one of the factors considered for deciding the company’s future. There are two main possibilities:


    • Creditors’ Voluntary Liquidation (CVL): If the remaining directors or appointed representatives believe the company cannot recover, they can initiate a CVL. This formal insolvency process involves selling the company’s assets and using the proceeds to pay off creditors, including the BBL lender, as much as possible.

  • Administration: Alternatively, the company could enter administration, which appoints an insolvency practitioner to manage the company and attempt to rescue it as a going concern. If successful, the company could continue operating and potentially restructure its debts, including the BBL.

Will my unpaid BBL debt be automatically written off after my death?

No, your unpaid BBL debt will not be automatically written off after your death. 

The responsibility for settling outstanding Bounce Back Loan debts typically falls to your estate upon your passing. Your appointed executor or administrator will manage your financial affairs, including addressing any outstanding debts like the BBL.

However, if your estate lacks the necessary assets or funds to repay the BBL debt, it doesn’t automatically mean that the debt will be written off. The lender will assess the situation and may pursue various avenues to recover the outstanding amount. This could involve attempting to recover the debt from any available assets within your estate.

If the estate is genuinely unable to repay the BBL debt, the executor or administrator can communicate with the lender to discuss the situation. Depending on the circumstances and the lender’s policies, they may consider options such as negotiating a repayment plan or applying for the debt to be written off due to financial hardship.


How to repay Bounce Back loan debts after death? 

Repaying Bounce Back Loan debts after death involves several steps to ensure that outstanding obligations are addressed appropriately:

1: First off, determine who will be responsible for managing the deceased’s estate. This person will oversee the repayment of debts, including the BBL.

2: Inform the lender about the borrower’s death as soon as possible. Provide necessary documentation, such as death certificates, to authenticate the information.

3: Compile information about the deceased’s assets and liabilities. This includes bank accounts, investments, properties, and outstanding debts, including the BBL.

4: Then evaluate the financial situation of the estate to determine the available funds for repayment of debts. Consider liquid assets, savings, and any income sources.

5: It’s time to communicate with the lender to discuss repayment options. Negotiate terms if necessary, such as extending the repayment period or negotiating a reduced settlement amount.

If there are sufficient funds within the estate, use them to repay the BBL debt. Liquidate assets or utilise cash reserves as needed. 

If the estate lacks adequate funds to repay the debt, apply to the lender for a potential write-off. Provide documentation demonstrating the estate’s financial hardship and inability to repay.

6: Maintain detailed records of all communications, transactions, and agreements related to the repayment of the BBL debt.

Ensure that the BBL debt is fully repaid or appropriately addressed according to the agreed-upon terms and legal requirements.


Seek professional guidance regarding BBLs and death with Vanguard Insolvency!

If you’re facing complexities regarding Bounce Back Loans  and death, consider seeking professional guidance from Vanguard Insolvency. They can provide expert advice and assistance in navigating the legal and financial aspects of BBLs after the borrower’s demise. 

You can reach Vanguard Insolvency at 0121 769 1915. Their experienced team can help you understand your obligations, explore repayment options, and handle communications with lenders. 

With their support, you can ensure that the estate’s affairs are managed effectively and in compliance with relevant regulations, giving you peace of mind during a challenging time.

David Jackson MD
Senior Partner at Vanguard Insolvency Practitioners | Website

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.