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  • Estate Liability on Loan Co-signer's Death

    My father last year co-signed for a student loan taken out by one of his
    grandsons, and is being asked by the grandson to co-sign for another loan
    this year (the grandson has some credit problems that have caused him to be
    rejected for a student loan on his own).

    Given my father's age and health, there is a reasonable possibility that he
    will not outlive the time his grandson is at university, and I am curious
    about what happens with the loan in the event he, as co-signer, should die
    before repayment of the loan is scheduled to begin:

    If the co-signer dies and the other signer for the loan (the actual
    recipient of the money) is considered a high-risk for defaulting, can the
    lender demand he find another co-signer or call the loan?

    The recipient of student loan (his grandson) doesn't have to begin repaying
    the loan until he finishes university, something presumably three or four
    years down the road. If, God forbid, my father should pass away in, say,
    two years, would the fact that he is financially responsible for a loan that
    might not be paid off by the other party (grandson) for many years interfere
    with settling the estate?

    Can the lender simply demand that a loan co-signed by the deceased be paid
    after his death? Might his estate find itself suddenly liable for two or
    three years of college tuition & interest as one of his outstanding debts?

    Thanks.

    --
    Robert



  • #2
    Estate Liability on Loan Co-signer's Death

    On Wed, 27 Aug 2003 08:54:05 -0400, "Robert E. Lewis"
    <[email protected]> wrote:
    If the co-signer dies and the other signer for the loan (the actualrecipient of the money) is considered a high-risk for defaulting, can thelender demand he find another co-signer or call the loan?
    Only if the terms of the note allow it.
    The recipient of student loan (his grandson) doesn't have to begin repayingthe loan until he finishes university, something presumably three or fouryears down the road. If, God forbid, my father should pass away in, say,two years, would the fact that he is financially responsible for a loan thatmight not be paid off by the other party (grandson) for many years interferewith settling the estate?
    It could. When debts are contingent on future events (your father
    would not be liable unless and until the grandson defaulted), the
    courts usually have some discretion in dealing with the debt. The
    court might, for example, require that the estate set aside a small
    amount as a reserve to pay in the event of a future default. Or the
    court might require the beneficiaries to assume liability for the
    debt.

    So a contingent debt can complicate things.
    Can the lender simply demand that a loan co-signed by the deceased be paidafter his death? Might his estate find itself suddenly liable for two orthree years of college tuition & interest as one of his outstanding debts?
    If the note provides that the death of a co-signer causes a default
    (and acceleration), then the creditor can collect from the estate
    immediately. But if there is no default and nothing in the note that
    allows the holder to require pre-payment, then the creditor will just
    have to wait to see if the payments are made by the grandson when they
    are due.


    **Dan Evans
    **I post information, not advice.

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    • #3
      I loaned a friend some money several years ago to help start a business, and the business failed and I was not repaid for the loan. I also, the same year, had losses from other investments in the stock market. My understanding is that I can only deduct $3000 in investment losses for that year. Is the personal loan in the same category as the other investments? Or is there a way I can claim that loss separately?
      government grants for small business

      Comment


      • #4
        Yes. The co-signer is basically the only signer, since their credit - good name - and debt / income ratio are being used. The other person is merely piggy backing on the co-signer in an effort to improve their own credit. Signing a document for any loan is a debt, so yes - the debt would still need to be paid by whatever means available by the estate.

        Not likely, If the loan was in default and the cosigner had already begun paying on it, the estate MIGHT be held accountable if it were a federally funded loan. Other than the lender would NOT be able to place a claim against the deceased's estate.
        Personal Loans

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        • #5
          co-signer

          My mother's home was in her name only. She co-signed a loan for my father. My mom recently passed away. she did not have a will, therefore the house is my dad's and the 3 kids. How does the note she co-signed affect the children.

          Comment


          • #6
            efsmurf - would you please start your own new current thread. You added to an old thread. Thanks.
            Too often we underestimate the power of a touch, a smile, a kind word, a listening ear, an honest compliment, or the smallest act of caring, all of which have the potential to turn a life around. Leo Buscaglia

            Live in peace with animals. Animals bring love to our hearts and warmth to our souls.

            Comment


            • #7
              amandaaz, would you please start your own new current thread. You added your question to another poster's old thread. Thanks.
              Too often we underestimate the power of a touch, a smile, a kind word, a listening ear, an honest compliment, or the smallest act of caring, all of which have the potential to turn a life around. Leo Buscaglia

              Live in peace with animals. Animals bring love to our hearts and warmth to our souls.

              Comment

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