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.

Albert dies.

What rights does the bank have at this point. Can they repossess the car?

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?

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.


1 Answer 1


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:

  • 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.
  • 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.
  • 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 leaves the estate by virtue of being no longer in the name of the deceased, its obligation was taken up by the refinancer. It's up to the bank to agree or deny.

Many loan contracts contain a clause for the case of debtors dying.

  • It would be nice if the answer cited a source, especially relevant sections of federal or provincial law, or perhaps a text or essay from a reputably source. Commented Dec 10, 2020 at 18:51
  • If I signed a $10,000 car loan and with interest have to make 22 monthly payments of $500, I would assume that the loan is not in default as long as my estate makes the 22 monthly payments, and the estate doesn't have to pay the $10,000 there and then. Do you have evidence that says otherwise? Especially since son Bob made regular payments, and there is no reason why he would stop after his father died.
    – gnasher729
    Commented Dec 11, 2020 at 12:34
  • @gnasher729 estates have to be settled in a timely fashion. 22 months are not timely. State and country laws differ a lot. Assuming some time is up, the outstanding amount is owed, not the total.
    – Trish
    Commented Dec 11, 2020 at 12:40

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