Dealing with your spouse's debt liability after they pass away
Is the surviving partner legally liable to repay a debt incurred by the deceased spouse or can he seek exemption?
The untimely death of a husband or wife not only leads to emotional trauma but financial distress as well. Among the many financial problems that surviving partners face, one is debt.
Is the surviving partner legally liable to repay a debt incurred by the deceased spouse or can he seek exemption? Let us consider different categories of debt:
- Joint debt
Also, while a co-owner is generally a co-borrower in a property, a co-borrower may not be a co-owner. A co-borrower accepts the responsibility for repaying a loan with the primary applicant but does not have ownership rights.
- Secured debt
However, the lender cannot resort to coercive measures to compel the surviving spouse to make repayments, and any action for recovery or enforcement of security has to be as per the law. On the demise of a spouse, the security offered to the lender during his lifetime is enforceable.
- Unsecured debt
The legal heirs are liable to the lender only to the extent of value/assets, if inherited, from the deceased. If no assets are inherited, the surviving spouse or children have no liability towards the lender.
For instance, if the husband leaves behind movable or immovable assets which are inherited by the wife, the creditors can claim all such assets from the surviving spouse in accordance with the law. The court, in such an event, can attach all such assets and the creditors can recover the outstanding amount by selling these after initiating appropriate legal action.
If the surviving spouse has given a personal guarantee to the creditor for fulfilling the obligations undertaken by the deceased spouse, the process of attaching, applying or selling assets of the surviving spouse to recover the outstanding amount can be undertaken by the lender.
(The writer is Managing Partner, SNG & Partners)