Co-signing & dying: What if a loan co-signer dies? Is estate of co-signer liable?

A grim and tragic question perhaps, but I'm curious: What happens when a person that co-signed on a loan dies? Is the co-signer's estate potentially liable until the loan is paid off, the same as if the co-signer had borrowed the money themselves? Or, does the responsibility for the loan die with the co-signer? Does the bank/lender take on that risk?

3,397 2 2 gold badges 24 24 silver badges 35 35 bronze badges asked Feb 28, 2010 at 15:49 Chris W. Rea Chris W. Rea 31.7k 17 17 gold badges 102 102 silver badges 190 190 bronze badges

Can you get insurance on the loan to cover such issues (deaths/disasters/company bankruptcy)? Maybe it is even included by default?

Commented Mar 2, 2010 at 21:38

4 Answers 4

I did a Google search on co-signer death, which provided a lot of results that looked useful. The top result (from the Boston Globe) basically says "it depends".

answered Apr 25, 2011 at 14:14 John Broughton John Broughton 430 2 2 silver badges 3 3 bronze badges

I would love to see this answer improved. Maybe some excerpts of the results that provide a better context and information.

Commented Feb 9, 2015 at 16:51

Unless there is a specific clause in the contract, then yes, it would fall to the estate.

Just as assets tend to live on after you, so do your debts; or in this case, your debt-guarantee on behalf of someone else.

answered Mar 4, 2010 at 20:07 6,484 1 1 gold badge 21 21 silver badges 26 26 bronze badges

What if there isn't much of an estate? How does a co-signed loan rank in the priority list of people who get paid with limited assets?

Commented Mar 5, 2010 at 0:09

IANAL: But, likely it would end up in the courts then. The ranking would include if there the co-signer has put up any specific security, i.e. their house, as co-signing collateral. In any case, the creditor would stand ahead of regular inheritance by the usual heirs (son/daughter).

Commented Mar 5, 2010 at 14:25

What if there has been no default. IE someone cosigns on a 3 year Auto loan. 10 months in the cosigner dies but the Primary borrower has not missed any payments and has not had a status change that would allow them to refinance or cause them to default.

Commented Jun 16, 2014 at 19:03

@Chad: Suppose the only thing of value in an single-heir estate is a house, and debts total $100,000. By my understanding, the heir would be entitled to either "buy" the house for $100,000 or decline the inheritance and pay nothing; the decision would be based in large measure upon the total value of the debts in question. If the heir paid $100,000 which in present condition was worth $120,000 and then spent another $50,000 on personal-use upgrades, and then it turned out that the deceased had another $50,000 of debt the heir knew nothing about, I don't see any equitable way.

Commented Feb 9, 2015 at 18:02

. of assessing such debt to the heir. Had such debt been made known earlier, the heir would have been allowed to decline the inheritance, forgoing what--without that other debt--would have been $20,000 in equity, which would be less of a loss to the heir than having to pay a $50,000 debt or abandoning the $50,000 spent on personal-use improvements.