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Who Pays Your Debt Or Loan After You Die?


Death is the only certainty in life. Many individuals do question: what happens to my debt or loan after I die? Who pays? In fact, in most cases, if you do not pay your debt, others including your legal heirs may end-up paying the same. Of course, it again depends on the kind of debt you have left behind before your death.

Who Pays Your Debt Or Loan After You Die?
Here is what happens to the various categories of debt you have left behind, if you are an Indian citizen and have debts in India.

1) Credit Card outstanding

If you have an outstanding on your credit card, the legal heir will have to make good the same to the extent of the inherited assets.

So, if you have inherited assets worth Rs 20 lakhs and you are the legal heir than you better pay the credit card outstanding to the bank. You are legally bound to do so.

2) Home Loans Outstanding

If you are a legal heir, and if you have inherited your father's property after death, there is no way you can claim the property without paying the outstanding home loan amount. You can't have the cake and eat it too.

Generally, banks and financial institutions insist on individuals taking a term insurance, which also covers the home loan outstanding. You can pay the amount outstanding through the proceeds from the insurance, if you are nominee to the same.

In case you do not as the legal heir agree to do so, the bank or the financial institution has the right to dispose off the property. The amounts so received will be used by the bank to settle the debt amount and thereafter you will receive the excess amount. Remember that this is a mortgage loan.

3) Auto Loans

Auto loans would also work on the same principle as that of home loans. You need to first pay off the amount or the bank has the asset hypothecated.


4) Personal Loans

Personal loans are insecure loans, though the legal has to make make good the loan outstanding. However, these days all personal loans are insured and the insurance premium is paid by the clients after adding the premium to the EMI. So, the bank may recover from the insurance company after all.

5) Income Tax

If you die and have tax liabilities, the onus is not on the legal heir to pay. Outstanding tax is waived off and thank God for it. At least there is some liability that gets waived off.

6) Personal loans from family members

You need to have some legal documents to prove that you have lent money to the deceased. If your legal papers are in place, the legal heir could be forced to pay the money.

This is the same like personal loans taken from the bank. Nobody wants to get into legal hassles, especially when they have inherited wealth.

If you have received from the real estate of your parents, relatives of friends, you should also be prepared to pay the deceased's outstanding liabilities. Court cases are tedious and consume a lot of time.

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