A spouse in a community property state: If you’re a surviving spouse in a community property state, you might be liable for some or all of the remaining balance on your late spouse’s auto loan.A co-signer or co-borrower: If there’s a co-signer or co-borrower on the loan, responsibility for repayment will fall to them.Who is responsible for making payments on an outstanding auto loan will depend on your specific situation. They might also be able to provide specific loan documentation detailing monthly payments, the time remaining on the loan term and the payoff amount, depending on the lender’s policies. The lender should walk you through what needs to happen with the loan, such as contacting a co-signer.
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Be prepared to provide a death certificate for their records. The first thing to do is to reach out to the lender and let them know that the primary borrower on the loan has passed away.
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If the owner of a car with an outstanding loan has died, follow these steps: 1. Liability can also be changed if spouses decide to sign a pre- or postnuptial agreement declaring that their debt and income will be handled separately. Only debt incurred during a marriage will be impacted by community property laws. However, these rules don’t apply if the car loan was taken out before the spouses married. For example, if one spouse owes $20,000 on an auto loan, the other will be responsible for $10,000 of that debt-even if that spouse was never listed on the loan or car title. This means that if a spouse dies with an outstanding car loan, the remaining spouse will generally be on the hook for repaying some or all of the remaining debt. In these states, property or assets acquired or loans originated by one spouse during marriage become jointly owned and are the responsibility of both spouses. Alaska also adheres to community property laws in some situations. There are nine of these states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Laws surrounding debt after someone dies are different in community property states. The exact terms of the death clause will vary depending on the lender as well as your state’s laws. Additionally, if the loan is secured by the vehicle-as most auto loans are-then the car could be repossessed by the lender if payments aren’t continued. There are also some lenders that require the car to be refinanced if the primary borrower dies. This clause typically explains that if there’s a co-signer, payments will be that person’s responsibility-but if not, the payments will fall back on the deceased’s estate. Car Loan Death ClauseĬar loan agreements usually include a death clause that covers what the repayment process will look like if the borrower passes away. However, if the auto loan has a co-signer or co-borrower (such as a surviving spouse), the car and its payments will become that person’s responsibility. After this, anything that remains will be distributed to beneficiaries through probate, a court process that analyzes the deceased’s will and ensures it is carried out.
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The executor of the estate is responsible for paying off these debts with the available assets. If someone dies before paying off an auto loan, the loan will typically become part of the deceased’s estate, which includes all of that person’s assets as well as any outstanding debt. What Happens to an Auto Loan If a Car Owner Dies? If you’re wondering what happens to a car loan when someone dies, here’s what you should know. And unfortunately, if you take out an auto loan and pass away before paying it off, the loan doesn’t just go away. While no one wants to think about dying, anything can happen.