My Co-signer Died... Is His Estate Responsible for Repayment If I File?

[CuriousG]

Hello, everyone!

First of all, I wanted to thank you for the wealth of information your posts have provided. I am so glad that I found these forums...

I had the initial "getting to know you" meeting with my attorney today, and I felt very prepared. It felt more like I was interviewing him than the other way around. I even had a couple "that's an excellent question" moments when I inquired about some things that I had read about on this site.

There was one question, however, that he was not able to answer to my satisfaction, and I have gotten conflicting answers while searching the internet. Here is the situation:

Several years ago, my wife took out a private student loan. It wasn't a typical student loan in that it was through a bank, so it will most likely be dischargeable. To get the loan, we had to have a co-signer (my father). Well, Dad passed away in February of this year, and my mother is the sole beneficiary of his entire estate. Since her name was not on the original loan as a co-signer, will she be responsible for repayment? Will the estate? Also, will this negatively affect her credit?

We are not sure if we will qualify for Chapter 7 or Chapter 13, so if the answer differs for each, that information will be equally useful.

I apologize if I'm posting this in the wrong place or if this has been covered elsewhere (I ran a search, but came up with nothing)...

TIA for your help!

G

[frogger]

. Well, Dad passed away in February of this year, and my mother is the sole beneficiary of his entire estate.

Normally, the administrator of the estate is responsible for paying the bills. I'm not sure about the length of time the estate must remain open for creditors in your state, but when the estate was administrated, a notice should have run in your local legal organ (newspaper).

That would call for anyone that has a claim on the estate to make said claim. If no one made a claim, and the administration of the estate has been completed, then there should be nothing to make a claim on, for it is over.

I understand the bk attorney having questions on this. Have a consult with an attorney that does estate planning & wills. That attorney can give you a definitive answer for your state and situation.

[catleg]

I think I would keep paying on that loan until the estate was closed out.

[LadyInTheRed]

I don't know about other states, but in California, not only must the administrator of the estate publish notice, but she must also send notice to all known creditors. She has a duty to go through the decedent's records and find creditors. With very few exceptions, claims against the estate are barred one year after death. So, if the administrator doesn't know about the creditor and the creditor doesn't learn of the death and file a claim within a year, the creditor won't be able to collect against the decedent's estate or the beneficiaries. If the estate closes earlier than one year after death, a creditor has a right to collect against the beneficiaries up to the value of assets they received from the estate.

After all of that, I thought of something. Your father is not obligated on the debt until your wife defaults. So, if she didn't default while he was living, maybe the estate is not liable. I Googled "death of cosignor" and found one attorney who said the estate wouldn't be liable if the default was post-death. But, I also found conflicting info. It may depend on the loan agreement. Try the search, but also ask an attorney with experience in administering estates in your state.

The answer is by a California lawyer, so you should make sure what he says is true in your state.