Credit and death: what happens to my debts?
Although we are reluctant to be reminded of our death, of course, it is a reality that should sometimes be considered in connection with financial projects. What happens to my unpaid loan in the event of death? Can relatives be prevented from inheriting the borrower’s debts? We have formulated the answers for you.
Credit and death – what is inheritance law?
Basically, the testator’s survivors inherit his assets and debts. The heirs of the deceased must therefore pay for various types of credit, ie for claims from creditors. At the same time, however, it also applies that nobody is obliged to accept an inheritance. If you are afraid that the testator will mostly leave you debts, you can turn down the inheritance (see inheritance law in the ZGB). In this case, you go away empty-handed, but you don’t have to be liable for the testator’s debts.
If it is unclear what the testator’s financial situation was shortly before he died, a public inventory can be requested. All of the testator’s assets and liabilities are recorded and published in the official gazette. After completing this inventory, you can:
- Reject the inheritance.
- Require official liquidation. As far as possible, the debts are repaid by the assets of the deceased, you receive the remaining assets / debts.
- The inheritance under public inventory (you are only liable for claims that are listed in the inventory) or accept unconditionally (you are liable for inherited debts with private and inherited assets).
What happens to the consumer loan?
Are you interested in a consumer loan, but first want to know whether your heirs will have to pay your debts if you die? There is a reassuring answer: Nowadays, most consumer loans are provided with installment insurance, which pays the debt if the borrower dies. In this case, the heirs will not be charged the consumer loan. The Consumer Credit Act (KKG) also obliges lenders to integrate such insurance into the consumer credit in any case, which must be evident in the contract.
Can additional insurance make sense?
The conventional installment insurance only pays the loan debt in the event of death. Should the borrower be unable to pay the installments for any other reason, he must continue to pay the debt himself. Therefore, additional insurance can be very useful, especially for larger loan amounts and longer terms. This protects against:
- Loss of earnings due to illness
- Loss of earnings due to an accident
- Loss of earnings due to involuntary unemployment
Our tip: turn on credit intermediaries
If you are unsure of what will happen to your loan in the event of death, it is worth contacting a specialist advisor. For example, the employees of M-Standing Kredit are experts in the credit area for companies and private individuals. Not only can they provide you with all your questions about consumer credit, death and possible insurance, but they can also provide you with the cheapest offers on the market. We always recommend that you carefully inform yourself about all modalities before taking out a loan, which does not exclude the consequences of a death.