A grim and tragic question perhaps, but I'm curious: What happens when a person that co-signed on a loan dies? Is the co-signer's estate potentially liable until the loan is paid off, the same as if the co-signer had borrowed the money themselves? Or, does the responsibility for the loan die with the co-signer? Does the bank/lender take on that risk?
3,397 2 2 gold badges 24 24 silver badges 35 35 bronze badges asked Feb 28, 2010 at 15:49 Chris W. Rea Chris W. Rea 31.7k 17 17 gold badges 102 102 silver badges 190 190 bronze badgesCan you get insurance on the loan to cover such issues (deaths/disasters/company bankruptcy)? Maybe it is even included by default?
Commented Mar 2, 2010 at 21:38I did a Google search on co-signer death, which provided a lot of results that looked useful. The top result (from the Boston Globe) basically says "it depends".
answered Apr 25, 2011 at 14:14 John Broughton John Broughton 430 2 2 silver badges 3 3 bronze badgesI would love to see this answer improved. Maybe some excerpts of the results that provide a better context and information.
Commented Feb 9, 2015 at 16:51Unless there is a specific clause in the contract, then yes, it would fall to the estate.
Just as assets tend to live on after you, so do your debts; or in this case, your debt-guarantee on behalf of someone else.
answered Mar 4, 2010 at 20:07 6,484 1 1 gold badge 21 21 silver badges 26 26 bronze badgesWhat if there isn't much of an estate? How does a co-signed loan rank in the priority list of people who get paid with limited assets?
Commented Mar 5, 2010 at 0:09IANAL: But, likely it would end up in the courts then. The ranking would include if there the co-signer has put up any specific security, i.e. their house, as co-signing collateral. In any case, the creditor would stand ahead of regular inheritance by the usual heirs (son/daughter).
Commented Mar 5, 2010 at 14:25What if there has been no default. IE someone cosigns on a 3 year Auto loan. 10 months in the cosigner dies but the Primary borrower has not missed any payments and has not had a status change that would allow them to refinance or cause them to default.
Commented Jun 16, 2014 at 19:03@Chad: Suppose the only thing of value in an single-heir estate is a house, and debts total $100,000. By my understanding, the heir would be entitled to either "buy" the house for $100,000 or decline the inheritance and pay nothing; the decision would be based in large measure upon the total value of the debts in question. If the heir paid $100,000 which in present condition was worth $120,000 and then spent another $50,000 on personal-use upgrades, and then it turned out that the deceased had another $50,000 of debt the heir knew nothing about, I don't see any equitable way.
Commented Feb 9, 2015 at 18:02. of assessing such debt to the heir. Had such debt been made known earlier, the heir would have been allowed to decline the inheritance, forgoing what--without that other debt--would have been $20,000 in equity, which would be less of a loss to the heir than having to pay a $50,000 debt or abandoning the $50,000 spent on personal-use improvements.