Advise required: Death of a loan guarantor

Goose-XL

Hi Everyone,

I'm after a bit of advice on the following please.

I know an individual who's wife has recently passed away. The wife was a guarantor on a loan for someone else.

My question is: Who now takes on the responsibility of the guarantor?

It is my understanding that should there be any default on payment etc, then the lender would look to recover the debt from the guarantor's estate.

However, what happens when there is no will in place, only a marriage with equally joint assets, cash, etc?

In the case of a default on the loan how would they pursue the debt in this scenario?

Any advice on this subject would be greatly appreciated.

Thanks.

sourcrates

Hi,

When people co-sign a loan for someone, they are responsible for the loan even after death. If you are a guarantor on a loan, regardless of who the borrower is, and you pass away, the courts can go after your estate should the borrower stop making payments.

This is one of the many reasons why it is so important to consider all aspects of a guarantor loan before signing on the dotted line. Regardless of the specific situation, co-signing a loan is a serious decision that is not to be taken lightly, for many good reasons.

Of course, when a guarantor dies and the borrower is still making regular payments on the loan, everything remains the same. The only challenges come in the case of the borrower ceasing to make payments on the loan itself.

Brock_and_Roll

The fact that there is no will in this case is irrelevant.


The Probate Court will appoint an executor which may or may not be the surviving spouse or other relative.


As previously stated the guarantee remains valid and becomes a contingent liability of the Estate - so if the Estate is solvent, the Executor cannot legally distribute the assets without making provision for the guarantee.


In practical terms it may depend on how long the underlying loan(?) has remaining and the amounts potentially involved. One practical solution would be to lodge the maximum liability (if calculable) under the guarantee in an escrow account with a firm of solicitors. If there is then no need of any claim under the guarantee, these funds can later be released to the beneficiaries.

Goose-XL

Thanks for the reply.