The second wave of Covid-19 caused insurmountable pain and hardship to family members of hundreds of thousands of deceased. The situation became particularly precarious for the surviving family members of the deceased if they have an outstanding loan. In such as case is the legal heir or surviving member liable to pay the dues?
Joint debt
If a couple has taken a joint loan such as a home loan as co-applicants and the primary applicant passes away, the liability for repaying the loan passes on to the surviving co-signer of the loan application. In case the surviving co-applicant fails to fulfil the repayment commitment then the lender can take legal route for recovery though the civil court, Debt Recovery Tribunal or under the SARFAESI Act depending upon the situation. It is to be noted that while a co-owner may be a co-borrower, the reverse may not be true.
Secured debt
In case a spouse dies while honouring a secured loan, the surviving partner will need to initiate the lender of the station and provide the death certificate. In case the surviving partner fails to honour the commitment then the lender is within their rights to take possession of the collateral or enforce the security.
But the lender cannot enforce the surviving member to pay up.
Unsecured loans
According to Rajesh Narain Gupta of SNG & Partners, if a person dies before repaying the unsecured loan, the lender cannot claim unpaid dues from the surviving partner or legal heir of the deceased debtor. In the absence of collateral, property seizure is also ruled out.
The serving partner or legal heirs are only liable to the extent of assets inherited from the deceased person. In case there are no assets then the surviving spouse or legal heir have no legal obligation towards the lender.
But in case the indebted spouse of a deceased parent leaves behind movable or immovable assets then creditors can make a claim against such assets. The court can attach such assets to recover the outstanding amount after due legal proceedings.
