If a person died and he has a loan. If a person dies, who pays his loan? What actions are performed by the bank
Death suddenly overtakes a person, without specifying whether he has dreams, debts or life plans. In everyday banking practice, situations quite often occur when a borrower dies without fully repaying his loan.
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What should relatives do in this case? Who will have to pay off all bank debts in the event of the death of the borrower?
The law states that repayment of the loan in the event of the death of the bank borrower is made by his heirs or guarantors. Many factors in this matter depend on the drafting of the loan agreement.
By and large, it doesn’t really matter to the bank who exactly pays off all the debts of their former client. The main thing is that payment is made on time along with accrued interest.
What you need to know about “posthumous debts”
In order to officially formalize all the necessary documents on loan repayment after the death of the borrower to his heirs, it is necessary to wait until the date when the inheritance rights come into force.
This happens no earlier than six months after death. At this stage, the heirs divide among themselves the received property and the debts of their relative.
If the heirs agree to repay the loan in good faith, the bank invites them to renew the existing loan agreement.
To do this, an additional formal agreement is drawn up to transfer the monetary debt of the deceased borrower to his heirs. Then the loan is repaid in a timely manner, in accordance with established rules.
In most cases, banks cannot wait a long six months and demand repayment of the debt as soon as they learn about the death of their borrower.
It should be noted that the heir pays off the debt of his deceased relative according to the inheritance received.
Thus, if the debt is $10,000 and the inheritance is only $5,000, the heir is not required to give up his personal funds to pay off the loan.
If the loan was taken out against real estate (car loan or mortgage), then the heir receives the collateral as an inheritance and can dispose of it at his own will.
For example, pay off the remaining monetary debt and live, for example, in the apartment you received, or sell the collateral to close the loan, and take the remaining amount for yourself.
If the will of a deceased borrower is made for a minor child, then the official guardians or parents must pay the inheritance debts.
At the same time, banks must take into account all legal actions so that they do not run counter to the rights of minor children and other citizens protected by law.
Inheritance of debt if:
- insured loan. It is much easier to repay an insured loan, since in most cases the insurance company fully pays the debts of the deceased client. But since insurance companies are not always in a hurry to part with their money, there are times when insurance agents refuse to recognize death as an insured event.
According to the insurance rules, debt repayment will be refused in the event of death in war or in prison, when engaging in extreme sports (diving, parachute jumping), in case of infection with radiation or sexually transmitted diseases.
It happens that insurance agents can translate the result of a fatal outcome into a chronic disease. For example, if the borrower died as a result of alcohol poisoning, the insurer can translate this into chronic liver disease, and if he smoked for quite a long time - into congenital heart disease.
In this case, the insurance will not cover the debts. But more often than not, well-known insurance companies do their work conscientiously, and everything goes smoothly without any complications.
Therefore, when applying for another large or long-term loan, you need to think about insuring your own life. Accident insurance can protect loved ones from additional costs.
- uninsured loan. In this case, the loan amount automatically passes to the heirs and guarantors, obliging them to fully repay the debt.
- with guarantors. A guarantor is a voluntary person who guarantees the borrower's solvency. Therefore, he must know and have access to all the details of the banking agreement and the necessary notifications in this regard.
In the event of the death of the borrower, the guarantor must pay the balance of his debt along with interest, as well as legal and other costs that the lender spent to bring the borrower or guarantor to justice.
If the loan of the deceased borrower was issued with guarantors, then according to the law, if the heirs do not fulfill their direct obligations regarding the repayment of the debt, then it is the guarantors who must do this.
In this case, after repaying the loan, the guarantor can demand from them through the courts compensation for material damage and all costs incurred in this regard. He does not receive the inheritance of his deceased friend, but having previously signed the loan agreement, he is now obliged to pay off the entire existing debt.
If relatives refuse to enter into inheritance rights, then the guarantor automatically becomes the main payer of this loan. In this case, the guarantor has the right to receive part of the deceased’s property to pay off his debt to the bank.
- without guarantors. It happens that the heirs are not even aware of their relative’s debts, but learn about it from bank representatives after the death of the borrower. Under a loan agreement without guarantors, it is the people who have entered into inheritance rights who are obliged to repay the entire debt. If the heirs do not accept the inheritance, the bank can legally demand the sale of the deceased borrower’s real estate by putting his property up for auction.
Calculation of interest on the loan
Since not all heirs and guarantors immediately turn to the bank for detailed advice after the death of a loved one, the bank, in turn, continues to charge interest on the loan penalty.
The bank's actions in this case are fully justified on legal grounds.
According to the rules, the heir is responsible for the debts of the deceased person from the date of his death. However, many penalties and accrued penalties can be challenged and even canceled in court.
If the bank borrower did not have additional late payments, then the court will definitely take into account death as a valid reason for late repayment of the loan debt.
If an heir inherits a loan debt from a deceased borrower, he must:
- Obtain a death certificate for the bank borrower.
- Inform the bank about the death of their client and provide a copy of the supporting document.
- Write and certify an application for acceptance of inheritance at a notary office.
- Six months from the date of death of the borrower, officially enter into inheritance rights.
- Document the banking process so that, on the basis of a new agreement, the payment of loan funds can continue.
- After receiving an inheritance, at the end of the current year, you must file a tax return and pay the required inheritance tax.
If the heir refuses the inheritance, he needs to draw up the relevant document with a notary and, if necessary, provide a copy of it to the banking institution.
Is it possible to avoid paying a loan after the death of the borrower?
You can avoid paying off the loan if the heir completely renounces the inheritance bequeathed to him. This must be done before six months have passed from the date of death of the relative.
A prerequisite is the renunciation of the entire inheritance.
For example, if an heir inherited two apartments and a car, he cannot give up one apartment in order not to repay the existing loan. You will have to give up all real estate at once.
Refusal of inheritance is not subject to return or change of decision. It should be noted that a minor heir can refuse a will only with the official permission of the guardianship authorities.
The death of a loved one or acquaintance is always a tragedy. But sometimes it raises even more unpleasant questions that relate to finances. And no, we are not talking about inheritance, but about loans. Nowadays, many people use the services of banks - they take out mortgages and loans. But who pays off the loan if the borrower dies? Well, there is an answer to this question.
Who is responsible?
The topic is actually complex. The answer to the question of who pays the loan in the event of the borrower’s death depends on a lot of nuances. And they need to be listed.
So, the most common case is that the debt is inherited. Let's say an elderly man died, leaving behind a son, and he bequeathed his savings and property to him. But along with this, the person also inherits the debt of his parent. What to do?
First, wait until the inheritance rights come into legal force. This usually occurs 6 months after death. During this time, the heirs divide the property and debts of the deceased. If they agree in good faith to repay the loan, then the loan agreement is reissued. Although most often the bank is not going to wait for the expiration of 6 months and begins to demand payments immediately. But! In any case, the heir pays the debts of the relative according to the amount of property he received. If, say, he received 300,000 rubles, and the deceased owes the bank a million, he is not obliged to give his own money for repayment.
With deposit
This is not all you need to know regarding who pays off the loan in the event of the borrower’s death. What to do if the loan was issued by the deceased on the security of the acquired property? Apartments, for example, or a car? In this case, the heir receives the collateral and the right to dispose of it at his own will. There are two options. And here they are:
- Pay off the remaining debt. Use a purchased car or live in an inherited apartment, which was taken out with a mortgage by a relative.
- Sell the collateral. This way you will be able to kill two birds with one stone - close the debt and take the “profit” for yourself.
By the way, there are situations when it turns out that the property and savings of the deceased are registered in the name of someone who is not yet an adult. Who pays off the loan if the borrower dies in this case? Parents or guardians of the minor. But at the same time, the bank takes into account every legal action. Since it is important that nothing goes against the rights of minors.
In the case of an insured loan
This is a special situation. If a loan issued by a person who has left this world was insured, it will be easier to repay it than in other cases. Why? But because this will be done by the company that insured the loan. However, there are pitfalls here too.
No one wants to part with their funds, especially insurance companies, and there is a huge chance of failure. The company may simply not recognize the death of the debtor as an insurance situation! This happens in cases where a person has died:
- In war or in a maximum security prison/colony.
- During an extreme sport (diving or skydiving).
- Due to contamination by radiation or a venereal disease.
If the case does not correspond to any of the above, the insurance company, not wanting to pay the debt, may refer to the fact that the person left this world due to a chronic illness. If, say, he died due to alcohol poisoning, then the agents are quite capable of claiming that it was due to his unhealthy liver. Did you smoke a lot? Then everything will be attributed to congenital heart disease. But this is usually what unscrupulous companies do. Those companies that occupy the first lines in reliability ratings are conscientious.
Surety
What about how the loan is paid off in the event of death if it was not insured? This is the same situation that was described at the very beginning. The debt is inherited. But a special case is when, when applying for a loan, a person turned to a guarantor for help. This is a volunteer, usually part of a circle of close people, who guarantees the solvency of the person being loaned. Not everyone agrees to act in his role, because if something happens to the person, the debt will fall on the shoulders of the guarantor. He will need to not only pay back the debts to the bank, but also all the required interest and costs spent by the creditor to bring the guarantor to justice.
Compensation for the guarantor
And there are some nuances here. For example, a loan was issued by a person who has fully grown working children - heirs. But his guarantor was a close friend. What then? In this case, the debt must be paid by the heirs. But if they are unscrupulous, they can simply ignore it. And then the guarantor will need to “pay the bills.” But! He has every right to demand compensation for material damage in full by turning to the courts. True, this is only after the loan has been paid off.
What should you remember?
There are still a lot of nuances regarding the question of who will repay the loan in the event of the death of the borrower. Here is one of them: the bank, despite the death of its client, continues to charge interest. There are reasons for this. The heir, according to the rules, begins to be responsible for the debts of the deceased from the day he left this world. But still, certain charges, penalties and penalties can be challenged and canceled. However, for this you need to go to court. But usually, if the borrower paid his debts regularly and acted in good faith, the bank takes this into account as a valid reason and late payments due to death are canceled.
Actions
However, it’s still not worth delaying. Who will pay the loan in the event of the borrower's death if not the heir? Nobody, so you need to gather your thoughts and follow these instructions:
- First get a death certificate.
- Then contact the bank to report what happened. It is best to come to the department, and immediately with a death certificate.
- Then you need to go to the notary. There, an application for acceptance of the inheritance is drawn up and certified.
- The next stage is a six-month wait. As already mentioned, after 6 months the person will assume the rights of an heir.
- Then you need to prepare a tax return to pay a certain percentage on the inheritance.
- After this, the person must again go to the bank to renew the loan agreement and begin paying off debts.
As you can see, there is nothing complicated, so it is advisable to resolve these issues as soon as possible. A loan and the death of a borrower are big troubles, a huge misfortune, but the sooner a person takes the above actions, the better.
How to avoid responsibility?
The above recommendations can help people who are faced with the problem under discussion. But does the loan need to be repaid in the event of the borrower’s death? “Surely this can be avoided somehow?” - Many people ask this question. Well, it really is possible. To do this, the heir must renounce all property that was bequeathed to him. Within six months.
Before you decide to take this step, you need to think everything over, since renunciation of bequeathed property cannot be changed or returned. A minor, by the way, can refuse an inheritance only if he receives official permission from the guardianship authorities.
What if the guarantor of the borrower who left this world also died? This happens, however, very rarely. In such situations, the debt is not transferred to other heirs and his close people. What happens to the loan if the borrower and guarantor die? This should already worry the bank's management - most likely, they will look for heirs.
Information for co-borrowers
Now you can take out loans together with someone. With a relative, of course, or with an official “other half”. Then two people who decide to apply to the bank for a loan become co-borrowers. But if it so happens that one of them dies, who will pay?
The loan will still have to be repaid if the borrower dies. There are three options. And here they are:
- The co-borrower goes to the bank with a death certificate and re-signs the loan agreement. As a result, all debts fall on his shoulders.
- A person finds someone who can help him with payments. That is, become his new co-borrower. However, he and his income must meet the bank's requirements.
- The co-borrower decides to waive half of the debt belonging to the deceased and continues to pay only “his” part.
The last case is special. So, for example, if co-borrowers took out a targeted loan to purchase an apartment, then the bank will sell the housing. With the proceeds, he will pay off their total remaining debt. But the portion that was previously paid by the surviving co-borrower will be given to him.
About violations
Some people who received not only an inheritance, but also loan debts, decide to “outsmart” the bank. They do not give up the property they inherited, but they also do not do any of the above to renew the loan agreement. In this case, the bank contacts the executive service. And then the heir, who spared money to pay off debts, will need to answer to the court and go broke not only to repay the loan and interest, but also to reimburse the bank’s financial costs. Otherwise, there is a risk of losing property. The bank can simply sell it to recoup its losses.
However, if the lender does not come forward within six months of their client's death, the loan is cancelled. We also need to remember this.
The subject of the inheritance can be not only real estate or a certain amount of money, but also a large debt to the bank. In accordance with Art. 1175 of the Civil Code of the Russian Federation, the debts of the testator must be paid by the heirs.
That is why the question of who pays the loan if the borrower dies worries many.
Unexpected inheritance
Unpaid loan from a deceased relative must be repaid if the heirs intend to inherit. In another scenario, there is a possibility that the situation will be resolved without making payments.
It should be noted here that a lot depends on the specifics of drawing up the loan agreement. Very often, debt obligations are transferred to the guarantor of the deceased person. This approach on the part of the bank allows you to minimize possible financial losses from cooperation with the borrower.
To understand who pays the loan if the lender dies, it should be noted that even after the death of the borrower, interest continues to accrue. In this case, the most appropriate solution would be to notify the financial institution of the incident as soon as possible. The optimal sequence of actions for the heir or guarantor is as follows:
- Obtaining a death certificate for the borrower.
- Contacting the bank to notify the creditor of the death.
- Drawing up an application for acceptance of inheritance.
- Entry into inheritance (six months after the death of the borrower).
- Settlement of relations with the bank (acceptance of debt and preparation of a new repayment schedule).
To complete the paperwork for repayment of credit debt, you must wait until the date when the rights of inheritance come into force. This may take about six months. However, most banks neglect this rule and require payments to be made immediately after the death of the borrower.
Video: In what cases is a loan inherited?
Mortgage debt
Relatives of deceased creditors often wonder whether the bank is obliged to close the loan if the borrower has died and the mortgaged apartment is the object of the inheritance. To clarify the situation, it should be noted that the property is inherited according to the general inheritance rules of 2019.
The Federal Mortgage Law states that the deceased debtor is replaced by heirs in bank documents. This means that the wife must continue to pay off the deceased husband's mortgage debt.
Provided that the heirs are unable to make regular payments on the mortgage, then the bank has the right to take away the property and all pledged property. However, all payments made by the debtor are returned.
How to reduce the amount of payments?
If the heir has managed to figure out whether the relatives should pay the loan for the deceased and has made a firm decision to enter into the inheritance, then he should be prepared for the tricks of financial organizations. In addition to the loan principal, banks oblige the guarantor to pay a fine, which begins to accrue immediately after the death of the borrower. However, in such a situation, you can argue with lenders.
It is necessary to emphasize that the responsibility of the heirs, subject to their entry into the inheritance, is strictly limited to the value of the inheritance. If the bank requires a large amount from the borrower, then an appropriate solution would be to contact the bank. The basis for such an appeal may be Art. 333 Civil Code of the Russian Federation. The bank cannot go bankrupt due to repayment of the loan later than the due date, as a result of which the possible losses will not be so significant. This point will definitely be taken into account by the court.
Moreover, the court will definitely take into account the fact that the delay in payments was due to an emergency situation and the guarantor, until a certain time, may not even know that he is now obliged to repay the loan.
Important! The heirs or guarantors of the deceased borrower are liable to the bank solely within the limits of the value of the accepted inheritance.
Video: Does the bank have the right to demand penalties for a loan from heirs?
Features of repayment of an insured loan
Cooperation between a borrower and an insurance company can be beneficial not only to the bank, but also to the lender. In the event of his death, the insurance company pays off the debt to the financial institution.
However, even in this situation, everything is not as smooth as it might seem at first. Even if the loan is insured, the insurer does not always properly fulfill its obligations. Refusal to repay the debt is possible if the death of the borrower was not an insured event. Various situations fall under this list:
- death of the borrower in war;
- death in prison;
- death during extreme sports;
- death from radiation exposure;
- death caused by sexually transmitted diseases.
In order not to pay their client’s debt to the bank, some insurance companies use a trick. They can translate some fatal outcomes into chronic disease. Thus, insurance agents may position death from smoking as congenital heart disease.
In order to avoid becoming a victim of such fraud, it is recommended to use the services of well-known insurance companies that value their reputation. In this case, the question of who pays the loan for the deceased will be deprived of its relevance.
How to avoid paying off debt after the death of the borrower?
The only way to avoid a loan obligation to the bank in the event of the death of a relative is to renounce the inheritance. In some cases, such a solution is the only possible way out of the current situation.
Most often, this happens if the size of the inheritance and the amount of debt left by the deceased are incomparable.
To refuse an inheritance, the heir must write a statement about abandoning it. This must be done at the notary office at the place where this inheritance was opened. In case of claims from the bank, the heir must provide an appropriate certificate confirming this fact.
What's the result?
If a person dies, who pays his loan? This question may arise if the deceased remains in debt to the bank.
The right of inheritance of property, like all debt obligations, after the death of the borrower passes to the direct heir or guarantor. The whole essence of this situation can be reflected in the following theses.
Thesis No. 1. The liability of the heirs is limited to the amount of the inheritance
The bank has no right to claim other property of the heirs. The heirs are obligated to pay only an amount that is equivalent to the total debt of the deceased borrower to the financial institution.
Thesis No. 2. Interest continues to accrue after the death of the borrower.
Even if the relative of the deceased was not aware of his debt to the bank, interest still continues to accrue.
Thesis No. 3. The bank cannot demand early repayment of debt after the death of the borrower
All demands from the bank regarding the need for early repayment of the debt of a deceased relative have no basis. The financial institution can only insist on making payments within the terms that were agreed upon with the first borrower.
Thesis No. 4. The bank has the right to make claims in the form of accrual of penalties for late payments
Delays or large interruptions in payments are good reasons for charging penalties. This point is specified in the cooperation agreement.
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Most people, when signing documents for a loan, usually think about everything except their own death. Indeed, a person takes into account everything: how he will pay if he loses his job, if a crisis breaks out in the country, even if he himself becomes seriously ill, anything but his own death.
And it is imperative to take this development of events into account.
Let’s say that a person, while borrowing money, also signed insurance documents. There may be several such insurances: insurance in case of loss of work or disability, as well as in case of death of the borrower. In this case, of course, all costs of payments, as expected, fall on the shoulders of the insurance company.
Payments from the insurance company in the event of the death of the debtor are the debt itself, as well as all interest accrued to him after the moment of death. Therefore, the debtor’s relatives should immediately report his death to the insurance company. It is better if it is a registered letter with acknowledgment of delivery.
There are situations when an insurance company refuses to recognize the death of a debtor as insurable, hoping that grief-stricken people will not want to go to court and will pay the debt themselves. Unfortunately, this is what happens with small debts.
Insurers usually know how to refuse claims. Let’s say that at a court hearing they will prove that the borrower was already sick at the time of signing the insurance, and as evidence they will provide facts about how he went to doctors, hospitals and clinics. And the basis for such a refusal will be that the debtor knew that he was seriously or even mortally ill, and did not inform the insurance agency about this.
An event such as suicide is also classified as a non-insurable event. That is, if a person, having a debt, voluntarily passed away, the agency will not repay the loan for him, and the debts will be forwarded to the heirs.
If the cause of death of the debtor has not been established, then the insurance agency also has the right to refuse payments.
If the heirs do not comply with the deadline specified in the clauses of the contract for contacting the insurance company, it may also refuse to pay.
If the insurance company makes any decision that does not suit the heirs, they should contact its management in writing. The complaint must set out everything regarding the company's actions that, in the opinion of the heirs, are not correct. If the company has not responded to the written complaint, you should go to court.
Who pays interest, penalties and other charges from the date of death until the acceptance of the inheritance of the deceased debtor?
Banks, as a rule, charge interest even after the death of the borrower. And insurance, if it has been achieved, concerns only the loan itself and accruals on it only at the time of death of the person who borrowed the funds. So all penalties and fines accrued for non-payment of debt after the death of the debtor must be paid by the heirs. According to the law, all debts are counted from the date of death of the person from whom the inheritance is accepted. However, when applying to the court with a request to reduce the amount of assessments, judges, as a rule, accommodate the petitioners. It is also necessary to go to court if, due to lengthy proceedings with the insurance company, the debt has gradually increased.Cases concerning insurance and its validity during the period when the debt is collected by bailiffs are very controversial. Let’s say a person owes money, doesn’t pay, the bailiff collected the debt from him, and he suddenly died. How do insurance companies qualify this death for insurance purposes? According to practice, this is a very complex matter, in which much depends on the terms of the insurance contract, loan agreement, and so on.
If the borrower did not take out insurance, then all payments, fines and penalties accrued on the loan he took out earlier must be paid in equal parts to his heirs, unless they refuse to accept the inheritance. At the same time, it must be clearly remembered that the debt is paid only within the limits of the inherited funds, nothing more. That is, to put it simply, the payment of the debt does not exceed the amount received as an inheritance.
If the deceased debtor has a lot of loans and practically no property, it makes sense for the heirs to refuse the inheritance.
Very difficult cases are situations where the deceased leaves behind young children. In this case, the decision whether to inherit or not is made by their guardians. Sometimes banks conduct legal proceedings, citing the fact that minors, when moving to live with guardians, take things and household items from their parents’ house. They regard this as actual entry into an inheritance, which means they must pay the loan. But the law says that the debt is paid only if the inheritance is officially accepted.
Who pays the loan if the guarantor or co-borrower dies?
In the absence of insurance, all debts of a deceased co-borrower fall on the shoulders of his co-borrower, if there is one. If both co-borrowers are insured, the insurance company pays the deceased's share of the loan. If one borrower is insured for the entire loan, then the insurance agency is obliged to pay the entire amount of the debt.If the guarantor dies, then the debtor is asked to select another guarantor for his loan, or, if there are no takers, then draw up papers for the collateral property. Otherwise, banks may increase the interest rate on the loan to reduce the risk of non-repayment of the debt.
The situation is much more complicated if the guarantor is forced to pay for the person for whom he guaranteed after his death. This happens if the heirs of the deceased refuse to accept the debt. As a rule, credit institutions force the guarantors to pay everything, and then the guarantors themselves have the right to sue the heirs for repayment of this debt.