When a family member passes away with outstanding loans and credit card bills, handling those debts can be challenging.
First, it’s important to understand that these debts are typically settled using the deceased’s assets left behind. Legal heirs should gather all financial documents, including bank statements, loan agreements, and credit card bills.
If the deceased has sufficient funds, these debts are paid off before any assets are distributed to legal heirs.
If the person lacks enough funds, creditors may not fully recover the amounts owed. Surviving family members are generally not personally liable for these debts unless they co-signed for loans or were joint account holders on credit cards. In such cases, the co-signer or joint account holder is responsible for the outstanding balances.
Legal steps include obtaining a death certificate, succession certificate, no objection certificate, among many others and possibly seeking the assistance of a lawyer to navigate the complexities of settlement.
Here are what the experts say when it comes to settlement of loans of the deceased family member:
Shashank Agarwal, Advocate, Delhi HC
When someone dies, their debts are generally paid out of the property or money left with the deceased person. But if the estate cannot pay it and no one shares the responsibility then the dues/debts remain unpaid. The person shall not be responsible for repaying the debts of someone whose dies unless: –
• The person is a co-signor on a loan with outstanding debt.
• The person is a joint account holder on a credit card.
A succession certificate (without a will) is one of the crucial documents required to claim investments of the demised family member. To obtain the succession certificate, the following documents are required:
• Death Certificate of the deceased
• Legal Heir Certificate
• Proof of relationship
• Identity and address proof of the applicant.
• Affidavit
• No Objection Certificate
• Property details of the deceased.
In the case of a will, the following documents are required to claim investment of the demised family member:-
• Death Certificate
• Original Will
• Probate
• Investment-related documents
• Identity and address proof
• Bank account details and power of attorney.
Nishant Datta, Advocate – Delhi High Court
In general, the surviving member/legal heir is not personally responsible for paying the debt of the deceased person from his/her personal assets unless he/she has inherited assets of the deceased person, in which case they will be liable to pay the debts to the extent of value of the assets inherited.
In other words, the extent of liability of an heir is limited to the quantum of the assets inherited and not beyond it. These liabilities include all kinds of dues such as utility bills, credit cards, loans of all, kinds, etc. The line of succession is clearly defined in applicable
Succession laws, for instance, in case of a Hindu male, the line of succession and classes of heirs are provided for in the Schedule to the Hindu Succession Act, 1955 whereas for a Hindu female, the heirs and line of succession are provided under Section 15 thereof.
To claim investments of a demised family member in absence of nomination, the documents required include Surviving Member Certificate, in addition to identification documents as well as Will, if any. In certain cases, the Authority or establishment can insist on a Succession Certificate which is issued from the concerned Civil Court of competent jurisdiction.
In case of testamentary succession based on a Will relating to an immovable property, the Claimant may also be called upon to obtain a Probate of the said Will (or a Letter of Administration in case of claim relating to an immovable property in absence of a Will).