What happens to your loans if you pass away?

I wish you’d actually explained the whole thing...☕
If you inherit an estate, you inherit the debts along with it, so I don't see what the big deal is. 🤷

Look, I get how the whole probate process works—trust me, I’ve been through it—but the people over at American Express are either completely delusional or they’re actively trying to drive me insane. Two months ago, I went down to their corporate office to take over the loan, and nobody would even see me in person. After listening to a mountain of absolute nonsense over the phone, they told us the loan couldn't be transferred until the insurance payout—the death benefit part—cleared (which was up to like $800). It sounded perfectly logical at the time, right? Since the payout would lower the total debt. But here's the kicker: I can't touch a single cent in my grandfather's checking account until that loan transfer is finalized. So, we wait. Fast forward two months: the insurance finally pays out, and suddenly these geniuses at American Express tell me the loan *has* to be taken over in its full amount first, and then they'll just drop the insurance money into the checking account later. If that was the case, we could have settled this entire mess two months ago! Honestly, I’m about two seconds away from taking them to the papers.

So, what actually happens if an heir decides to walk away from an inheritance? Does the guarantor just get stuck holding the bag with a massive loan and a house that nobody technically owns anymore?

I mean, it’s pretty obvious—if the heir(s) decide to go ahead and claim the estate, they can basically just ghost the loan payments, and the bank is going to come after the guarantor’s paycheck instead. Once the bank realizes they can't squeeze any more blood from the stone of the guarantor's salary, the property falls to the heir. 🙂

Honestly, if you're ever acting as a guarantor, you really shouldn't be afraid to push the debtor to sign something—like a will or some other legal document—that specifically addresses the loan, or at least lays out a plan for how things get settled in case of death, default, divorce, or whatever mess happens next...

The real headache is that banks usually won't bother seizing the house if they can just garnish the guarantor's wages or hit their assets first. It's easier for them.

In theory, a guarantor needs to have some kind of paperwork in place that gives them the right to sell the collateral themselves to pay off the debt. That way, they can reimburse themselves for whatever was forcibly taken from their paycheck, and anything left over can go back to the debtor. Signing a guarantee without something like that is just plain crazy... And look, it isn't even about whether you trust the debtor or not; it's about the fact that you have no clue who might inherit that property down the line, and whether those people are actually going to cooperate or just play dumb while the bank is busy draining your bank account.

Look, here’s the cold, hard reality regarding what happens when a borrower kicks the bucket—it doesn't matter if we're talking about a mortgage, a personal loan, or an auto loan from Ford Motor Company. The bank isn't just going to shrug its shoulders and walk away; they’re going to come after the estate. If there are heirs involved, those heirs are staring down the barrel of that debt. Now, obviously, if the deceased person left behind enough assets to cover the balance, the bank gets its money and everyone moves on. But—and this is the part where things get messy—if the estate doesn't fully cover the debt, the bank can seize whatever existing assets are available to claw back a portion of what they're owed. They might then offer you a deal to pay off the remaining gap based on the estimated value of the estate, eventually writing off the rest. However—and I cannot stress this enough—if you decide to take on that debt repayment, you aren't just paying the principal. You’re signing up for every single headache attached to it: interest, late fees, processing fees for updating the account holder's name, and all the other administrative nonsense.

For instance, let's say the debt sits at $33333, but the total estate value is appraised at only $30000. In that scenario, the bank is going to grab those $30000, leaving a 10-unit deficit—which, let's be honest, isn't even a true loss for them since they've already padded their pockets through interest payments.

At the end of the day, in certain grim circumstances, it’s actually a much smarter move to simply disclaim the inheritance altogether rather than trying to settle someone else's debts.

Let me jump in here... can a creditor actually go after an inheritance? Suppose someone passes away completely broke, leaving absolutely nothing behind. Is it possible for them to come after the heirs, even if the deceased didn't own a single cent at the time of death?

Hello.
Can someone tell me if I’m actually liable for the bank loans my late father took out?

I'm in my 30s with my own family to support. My father passed away five months ago, and he left absolutely nothing behind—no assets, no property, nothing.

He and my mother divorced about 20 years ago. He was never involved in our lives and never even paid child support; we barely had any kind of relationship.

A few days ago, my father's mother called me. She said collection notices for his loans are coming and that this needs to be settled. Naturally, she refuses to hear a word about paying them back and expects my sister and me to handle it.

Am I legally obligated to pay these debts, and on what grounds?

I read somewhere online that debts are only settled up to the value of the estate being inherited. Is that true? What does that mean here, considering my father had zero assets other than this debt?

One more thing: there was no formal probate process. People told us there was no point in opening one since there was no estate to settle, and they didn't want to waste money on unnecessary legal fees.

Thanks.

They gave you the right info. You don't inherit anything, so you aren't on the hook for his debts either (unless you were his co-signer or something, I guess 😲)

I didn't! So, what's the move here? Do we file for probate or not? Is this going to be handled officially, or what? Should I actually head down to Chase, or just let them keep sending those collection notices to my grandmother's place where my father used to live?

Where do I even begin?

Draft up a will, formally renounce the inheritance—since there isn't any to speak of anyway—and then just send the settlement paperwork straight to the bank.

Alright, I get it. But I have another question that’s making me second-guess everything.

If I renounce my share of the estate during probate—even though there isn't actually any property to claim here—does that mean I lose my right to inherit from my grandmother when she passes away later?
Let me clarify: when my grandmother dies, her children inherit her estate, and since my father is deceased, I would inherit his portion. Does participating in this current probate matter for my future rights to that inheritance?

Anyone happen to have the answer to the question above?

wearytiger17 said:Anyone happen to have the answer to the question above?

Yeah. (we know)
Nah. (you aren't losing out)

thanks Mark Lee65👍

Look, you can't exactly walk away from an inheritance if the probate process hasn't even kicked off yet. And let's be real here—it clearly hasn't, since Grandma is still kicking around...

I NEED ADVICE!
My husband passed away suddenly, leaving behind an unplanned loan—one of those pop-up or cross-sell products—with a remaining balance of roughly $23333. He didn't own any significant assets, just two old cars that aren't worth much. I have two children who will be inheriting his Social Security benefits, though they won't be substantial since he only had 16 years of work history at the time of his death. This loan wasn't co-signed, nor did it have specific insurance coverage. However, the fine print regarding the collateral states this:
The borrower hereby pledges and transfers to the Creditor all current claims arising from their accounts or deposits held with the Creditor to secure the debt under this agreement, authorizing the Creditor to recover the insured debt from said collateral upon maturity without further notice.
My question is simple: how exactly does the bank intend to collect this money?

I need some clarity here, please.
Am I legally responsible for my husband's debt?

mistytrucker6 said:I need some clarity here, please.
Am I legally responsible for my husband's debt?

Well, yes, if you are an heir to his estate.
I’d suggest heading down to the bank to see if they can offer any restructuring options or a new payment plan.
The real question is which bank we're talking about... is this a legitimate institution like JPMorgan Chase, or some shady, fly-by-night outfit that's barely even a financial entity?

The issue involves JPMorgan Chase. I’m heading into a branch tomorrow to deal with this head-on, but until then, if anyone has any insight, please speak up—I don't plan on getting a wink of sleep tonight.

I can't say for certain, but as my colleague mentioned—if you happen to be an heir—you’ll most likely be responsible (or one of the heirs will be).

When my father passed away, once the probate process was wrapped up and we went to close out his account at JPMorgan Chase, they informed us that if there were any outstanding debts on the account, we as heirs would have to settle them before the account could be closed—just as any remaining funds would be subject to the estate proceedings. There wasn't any debt in our case, but that is simply the standard procedure for a checking account. I suppose it wouldn't make much sense for a loan to work any differently.

But of course, the best way to get a definitive answer is to speak directly with the bank in question.

mistytrucker6 said:The issue involves JPMorgan Chase. I’m heading into a branch tomorrow to deal with this head-on, but until then, if anyone has any insight, please speak up—I don't plan on getting a wink of sleep tonight.

Well, at least it isn't a complete disaster of a bank...
Wishing you the best of luck.