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Losing a loved one is painful. While money would be the last thing on your mind if you were in such a situation, you cannot ignore it either. It is critical to understand how the assets and obligations of the deceased will affect you and others in your family.
Although a person's debt is usually not passed on to their spouse or children, there may be instances where it could happen. You must be prepared for all eventualities and understand how debt inheritance works. Here is a detailed guide to debt inheritance and what you can do to deal with it.
Debt inheritance from parents to their kids varies according to different situations. The outcome also depends on who the deceased owes money.
Many creditors may want to talk about the moral responsibility of the kids when they try to collect the loan amount, but it is not under the jurisdiction of the law. Let us see some legal situations, where you may inherit your parents’ debt.
A person may pass away without clearing their home loan. If this happens, the bank will reach out to the heir of the deceased to recover the loan. If there is only one heir, the bank will recover money from him/her, and if there is more than one heir, the bank may suggest joint loan repayment. With home loans, there is scope for negotiation, though. You can negotiate with the bank to come to an agreement that works for all parties.
While banks cannot pressurise children to repay their parents’ loan, they can take possession of the property and auction it to recover their losses. That said, not every bank does so. IDFC FIRST Bank, for instance, gives the heir every opportunity to negotiate and arrive at a mutually acceptable solution.
If borrowers die before repaying their unsecured loan, the responsibility to do so falls on their heir. Banks are legally allowed to reach out to the heir if the borrower has passed away without paying the outstanding loan. If the heir cannot repay the loan, the interest will keep accumulating and the bank is within its rights to file a civil suit against the heir.
The court will ask the legal heir to repay the loan with the inheritance they may have received. Most people will try to settle the matter out of court, as going to court is costly.
There are some instances where you may inherit debt, but there are some where you wouldn’t.
Banks have a legal department to handle defaults and disputes regarding debt inheritance. They are experienced professionals who know how everything the law. Hence, it is always better to negotiate with the bank if you have debt inheritance.
Banks are frequently willing to grant legal heirs additional time to secure debt payback. If the amount is such that you cannot repay it, you can take a personal loan for debt consolidation. IDFC FIRST Bank offers personal loans for settling debt at reasonable interest rates. You can get a personal loan within minutes, provided you have a good credit history. You can select the tenure of your loan and avail other benefits as well. Download the IDFC FIRST Bank mobile banking app to get started.
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