contract-law canada trusts-and-estates loan
A deceased signed a car loan on behalf of a relative with poor credit- what happens?
<p>Albert signed a car loan on behalf of his son, Bob as Bob had poor credit. Bob drove the car and paid the repayments, though was not mentioned on the loan.</p>
<p>Albert dies.</p>
<p>What rights does the bank have at this point. Can they repossess the car?</p>
<p>What are Bob's options if he wants to keep the car? Can he offer to take on the loan? If the bank doesn't want this to happen, can he force them?</p>
<p>What is the executor of the estate to do? The executor is concerned that the bank will repossess the car, and then pay the car off with the sale of his fathers house.</p>

<p>When a debtor dies, with the debt outstanding, the debt enters default. The estate has to solve the outstanding debt before paying out any inheritances:</p>
<ul>
<li>The estate can and does pay up. This outstanding debt of the estate is gone, the car is paid off, and enters the estate as a value to be distributed as the will or rules dictate.</li>
<li>The estate doesn't pay up, nobody refinances the car. The car is not part of the estate and can't be inherited. The debt is in default, and the car will be repossessed by the bank, together with any other securities for the car. The items/money repossessed leave the estate before any item can be distributed.</li>
<li>The estate does not pay up, but one of the inheritors discusses with the bank to refinance the car. The car never enters the estate. The refinancing person now has a contract with the bank about a car loan. The debt <em>leaves</em> the estate by virtue of being no longer in the name of the deceased, its obligation was taken up by the refinancer. <strong>It's up to the bank to agree or deny.</strong></li>
</ul>
<p>Many loan contracts contain a clause for the case of debtors dying.</p>
