In the Event of My Death, What Happens to My Installment Loan Debt?
By: Annette Pachecoo
Tags: Loans, Debt, Wealth

For most adults today, installment loan debt is inevitable whether you like it or not. These debts may include items such as a student loan or a mortgage.

Installment loans are just part of life because they help consumers make big purchases without having the cash upfront.

But, have you ever wondered what could happen to these loan debts in the event of your death? First off, no, they don’t die along with you.

Instead, leftover installment loan debts are often an added burden to your grieving family. Click below for even more information:

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In this article, we’ll discuss what happens to your installment loan debt in the event of your death and how to face them.

What Happens to My Installment Loan Debt When I Die?

Unfortunately, your installment loan debts won’t be following you to your grave. Instead, debtors may start looking into your assets to see how they could liquidate them in exchange for your loan repayment.

They may also be in contact with your several parties who they find could be responsible to inherit your loan debts. On certain occasions, these loan debts may also be passed over to anyone who has co-signed on the loan with you.

Who Will Inherit My Loan Debts?

So, who would inherit your loan debts? Let’s have a look at who your loan debts would affect in the event of your death and the exemptions that may apply:

Co-signers or joint account holders of the loan. From a legally binding point of view, co-signers or joint account holders of the loan have agreed that they too will play a responsible part in handling the said loan. Hence, lenders would often be in touch with the co-signers of the loan so they can arrange a loan debt transfer. If your co-signers are not able to repay the installment loan in time, however, lenders may then take on a lawsuit to procure repayment accordingly.

From a legally binding point of view, co-signers or joint account holders of the loan have agreed that they too will play a responsible part in handling the said loan. Hence, lenders would often be in touch with the co-signers of the loan so they can arrange a loan debt transfer. If your co-signers are not able to repay the installment loan in time, however, lenders may then take on a lawsuit to procure repayment accordingly. Your immediate family. In certain states across the nation, your spouse and children may be held responsible for your installment loan debt when you pass on. This is especially true if you have a community property from the marriage and primarily affects residents in the states of Arizona, California, Idaho, Washington, and Wisconsin just to name a few. Do note that if your loan debt is a pre-existing loan debt before you were married, your spouse may be pardoned from inheriting this burden.

In certain states across the nation, your spouse and children may be held responsible for your installment loan debt when you pass on. This is especially true if you have a community property from the marriage and primarily affects residents in the states of Arizona, California, Idaho, Washington, and Wisconsin just to name a few. Do note that if your loan debt is a pre-existing loan debt before you were married, your spouse may be pardoned from inheriting this burden. A secured loan recovery party. If at the time of your death should you not have a next of kin, your installment loan debts may be inherited by a secured loan recovery party. This includes any personnel handling your will as they can represent you in making repayment arrangements. Subsequently, if a secured loan recovery party is not appointed, the loan lenders may take possession of your assets as collateral for repayment.

What Are the Types of Loan Debts That I Would Leave Behind?

In this part of the article, we’ll look at the types of loan debts that you would leave behind in the event of your death and the different rules that apply to them.

Unpaid credit card bills. In most events, unpaid credit card bills would be inherited by the joint account holder. This would allow your heirs to repay the loans with a more flexible payment arrangement. If there are no joint account holders, the lenders will then be allowed to refer to the secured loan recovery party in obtaining your assets to pay the loan amount. On certain rare occasions, the lender may also write off your loan as a loss if your assets aren’t enough to cover the loan amount.

In most events, unpaid credit card bills would be inherited by the joint account holder. This would allow your heirs to repay the loans with a more flexible payment arrangement. If there are no joint account holders, the lenders will then be allowed to refer to the secured loan recovery party in obtaining your assets to pay the loan amount. On certain rare occasions, the lender may also write off your loan as a loss if your assets aren’t enough to cover the loan amount. Home mortgages and car loans. If you’ve left a home mortgage and car loan behind, then chances are that your heirs will have to take on the responsibility in repaying the amount. On a positive note, home mortgages and car loans can typically be paid as per your original repayment schedule so your heirs wouldn’t have to pay the amount off immediately. In most cases, they can either continue to stay in your home and drive your car as long as they follow the repayment schedule.

If you’ve left a home mortgage and car loan behind, then chances are that your heirs will have to take on the responsibility in repaying the amount. On a positive note, home mortgages and car loans can typically be paid as per your original repayment schedule so your heirs wouldn’t have to pay the amount off immediately. In most cases, they can either continue to stay in your home and drive your car as long as they follow the repayment schedule. Home equity loans. Many times, a home equity loan is a loan debt that usually must be repaid immediately upon your death. This usually puts a strain on your grieving family, and in a worst-case scenario, may even put them on the streets as they would have to sell the house to make the repay the loan. Home equity loans are rarely recommended as there are many other alternatives for financial assistance.

Many times, a home equity loan is a loan debt that usually must be repaid immediately upon your death. This usually puts a strain on your grieving family, and in a worst-case scenario, may even put them on the streets as they would have to sell the house to make the repay the loan. Home equity loans are rarely recommended as there are many other alternatives for financial assistance. Medical bills. Loan debts from medical bills may vary from state to state as they’re usually prioritized during the court-supervised probate process. If you’re worried about leaving behind any medical-related loan debts, it’s always best to check in with your attorney to help clear the air.

Loan debts from medical bills may vary from state to state as they’re usually prioritized during the court-supervised probate process. If you’re worried about leaving behind any medical-related loan debts, it’s always best to check in with your attorney to help clear the air. Student loans. To help understand if your student loan will be left behind, it’s best to first find out if you’re taking up a federal student loan or a private loan. Federal student loan debts are usually pardoned upon your death so your heirs will not inherit the loan. If you have a private student loan, your heirs would have to repay the sum of your loan in full using your assets. A private student loan will only be pardoned if your assets are not enough to cover the loan amount.

What Can I Do To Protect My Loved Ones?

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If you wish to protect your loved ones from inheriting your installment loan debts in the event of your death, then you may want to consider purchasing a life insurance policy. Upon your demise, a life insurance payout would help your spouse and children get back on their feet.

This is as lenders are not allowed to possess your life insurance payout check, so even if all your assets are taken away for loan debt repayments, it would guarantee your family a little cash to go a long way.