The death of a relative or loved one is never a pleasant experience, and figuring out how to handle your financial affairs often adds to the pain. If a deceased person got out of a new car behind, there is a good chance that they too have left behind a car loan. There are many factors that determine whether and how that balance is paid, and ultimately, who is entitled to own the car.
If you are in the situation of being left to settle someone’s financial affairs that had outstanding car loans after he died, it is important to know the facts and your rights.
When a person dies, the property is born
When someone dies, the last thing friends and family want to think about is paying off debt. Fortunately, in most states, they don’t have to.
When a person leaves, all their debts and assets together constitute their assets. This property will “pay off” the balance of outstanding loans, including any auto loan, using available funds if there are sufficient funds to do so.
If the person leaves the will, the document will indicate the executor, who is the person responsible for settling and distributing the property. If the person dies without a will, the trial court will assign the administrator (usually the surviving spouse or close relative) this administrative role.
Credit life insurance
Some lenders offer the option of purchasing credit life insurance. If the deceased has purchased credit life insurance on his / her auto loan, this insurer is responsible for paying all or part of the loan balance, depending on the terms of the contract.
If the property does not have the means to cover the rest of the car loan, and if no credit life insurance has been purchased and the car loan was desired by the surviving relative, that relative is responsible for paying the remaining loan balance, whether or not they inherit the car themselves. .
This applies to any loan signed by a survivor. If this person does not proceed with the payment, the car may be returned to traffic and/or maybe furnished, depending on the country.
Communities Against State Real Estate
If someone buys a car or takes out a car loan in a common property state, when he dies, the property or any surviving cosigner will be fully responsible for paying the auto loan balance. Surviving spouses, relatives, and other beneficiaries will not be responsible for paying the debts.
Some preemptive lenders will reimburse the survivors of the deceased regardless (or hire a data collection agency), but it is important to know that these survivors are not responsible for payment unless credit is made or saved in their name.
However, nine states (Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, and Wisconsin) and Puerto Rico are considered state property states, and the laws are more complex.
In the state of community property, all property or property purchased by the spouse during the marriage, as well as the loans taken over, are jointly owned and owned by the other spouse.
This means that if a deceased person has more than $ 10,000 in arrears on auto loans if they pass, their spouse is responsible for $ 5,000 of that loan – even if their name was never on the loan or on the car title. Surviving relatives other than spouses are not subject to these rules.
Unsecured Versus Secured Car Loans
A secured loan is a loan that supports some type of collateral – in this case, a car owned by a deceased person. If payments for a secured car loan terminate for any reason, including the death of the person who signed the contract, the lender may return the car and sell it to cover the unpaid portion of the loan.
On the other hand, unsecured credit has no collateral. Although the vast majority of car loans are secured loans, people with excellent loans can sometimes take out unsecured car loans.
In this case, if a person dies, a car loan is no different than any other unsecured debt, such as a credit card or personal loan: it is the responsibility of the owner and any breeder of the loan, not any surviving relatives or heirs of the car, and the car cannot revert to credit status.
What if Love Dies?
If a friend or relative dies, it is important to send a death certificate to all lenders and major credit bureaus. This prevents fraudulent activity, including new accounts being opened on behalf of the deceased person, and allows debts to be settled properly. If the deceased person has had a lot of arrears, it is a good idea to hire an attorney to handle these financial matters on behalf of the deceased.
What to do if you decide to keep the car
If the person named the heir to the car in a will or other surviving friends and family members is interested in potentially holding the car, it is a good idea to continue paying for any unsecured car loans to avoid having the vehicle called again before the decision is made.
If a surviving family member ultimately decides to keep the car, it will need to be processed by a court of law to ensure that the person is the legal heir and to transfer the title. The new owner will also have to pay any state registration or tax fees, take out auto insurance on their own behalf and refinance the car loan or repay the loan balance in full.
If the loan is refinanced, the new owner will need to provide proof of ownership of the vehicle and prove their credit through proof of income or property, or a cosigner – simply owning the car will not be enough. In fact, it will be like applying for a loan again.