In the case of the death of a close relative or a relative, in addition to the hard blow that this implies, we find a lot of paperwork and paperwork that we must carry out . In the event that the deceased had personal loans in force, the documentation that we must manage can be overwhelming and complicated. When we process an inheritance, we not only receive the goods, but also the debts. This is why it is important to know if this person had valid credits and the steps that we must take to complete the succession proceedings.
The processing of the inheritance of personal loans
If we are in this difficult situation and we know that the deceased had personal loans still in force, the first thing we must do is notify the bank as soon as possible since, as a general rule, the personal loan installments will continue to be charged to the account associated with the holder of the personal loan and can not be modified until the change of ownership of the loan is made.
Who will pay personal loans when the owner dies?
When someone dies, the heirs receive the obligations and charges in addition to the assets and rights (such as the debts of the personal loans). According to the Civil Code heredity is a right and not an obligation, so the heirs will have the right to renounce it if they wish. In the event that the deceased had debts, we have 3 options regarding the inheritance of debts:
- Accept the inheritance with the debts included and pay them.
- Reject inheritance both assets and debts.
- Accept the inheritance for the benefit of inventory : this means that the heirs will receive the remaining assets of the inheritance once the debts have been met. This option is an alternative when the charges do not exceed the assets, so we can accept the inheritance without having to pay the remaining loans or outstanding payments.
What happens if there is an endorsement or there are two holders when the owner dies?
The figure of the guarantor does not disappear when the owner dies , it will only disappear when the debt is fully paid. The guarantor will continue with its guarantee function if the heirs accept the inheritance or until they satisfy the debt. In the event that they reject the inheritance the responsibility of the guarantee will depend on the contract of each personal loan.
In the event that the personal loan has two holders , it is considered that 50% (or the corresponding percentage depending on the number of holders) of the debt will pass to the heirs . In the event that the heirs reject the inheritance, the co-holder of the credit will be responsible for the outstanding debt of the deceased.
In the case of loans without collateral and without co-holders , the obligation falls on the heirs if they decide to accept the inheritance without benefit of inventory.
How to proceed with the bank? Procedures and protocol
Each entity will have a specific action protocol to carry out these procedures. In a generic way these will be the documents that we must deliver :
- Death certificate
- Certificate of last wills
- Testament or declaration of heirs
- Inheritance award deed
- Certificate of payment of inheritance tax: this document is delivered afterwards since the bank must give us the necessary certificates to pay it
- Public deed of resignation in case one or several of the heirs do not accept the inheritance.
Once all this documentation has been delivered, the bank will provide us with the different products that the deceased had contracted, such as his accounts, deposits, pension plans and personal loans. You can also ask us for some additional documents depending on the particular product .
Life insurance in the personal loans of a deceased
In many cases personal loans include an associated life insurance that the borrower must hire. In the event that there is an associated life insurance, we must review the conditions of the insurance coverage so that the insurer is responsible for the payment of all or part of the personal loans, although it is important to take into account the cases in the what is it like If this is the case we must also deliver the documentation relative to both the insurer and the bank.