Loan repayments at death?

Question

When a loan was taken out by the party that has died, is the estate / remaining family legally responsibly to pay the balance of the loan?

Answer 1

OK, that one guy was totally wrong about the next of kin. Here's how it works:

The party dies and it's time to reconcile his accounts. Someone figures out the outstanding debts and available assets (or estate) for things that are solely in his name, and for things that are joint.

Once this is done, his debts are weighed against his estate. If his estate (all assets) are able to pay for the entire debt then great. The remainder is provided to the executor to distribute as deemed by the will (if there is one). Otherwise a judge divvies things up.

If the debts are MORE than the estate for items SOLELY under his name, NO ONE is legally liable under ANY circumstances to pay for those debts. NOT A SOUL. Not next of kin, not anyone.

However, looking at JOINT assets which are usually things like homes are a different matter. If selling the home creates the necessary money to pay off the debts the home must be sold which would hurt the other person who's name is on the deal. Usually the executor of the will is given the task of selling the house and things to pay the debts.

This brings in the importance of LIFE Insurance. Most of us don't have any, or not enough to cover the expenses of dying. A life insurance policy is considered an asset as is supposed to take care of this very situation. If the dying party left any debts and they're only in their name, then they're gone. The person LEGALLY responsible for them cannot pay because they passed away.

Answer 2

It depends on whose loan it was. If somebody dies in debt their estate pays any outstanding loans. The question is what happens if there is not enough money to meet the debt? Well, if the loan is insured there is no problem and if the loan is only in the dead persons name and is unsecured (i.e. not secured against assets such as a house) the balance owing dies with them - it would be the loan companies own problem because they didn't get enough security. The thorny problem comes with joint loans (joint and several) where, if one person dies and there is insufficient in their estate to pay the loan the second party becomes responsible for the balance. There is no way out of the debt in these circumstances. Sad to say some people ask their partners to sign papers which turn out to be for joint and several loans and the partner wasn't really aware of their responsibility or the position they were being put in.

Hope this helps.

Answer 3

I think the loan is repaid out of any money they have when they die but if the debt exceeds the value of the estate then the rest is written off.

Answer 4

if the party had taken out insurance on the loan then no, make a claim. if not it may have to paid back by the next of kin!!