Legal heirs inherit liabilities of dead person’s loan guarantees, too
By Chaitali Dutta
l My father stood as a guarantor for a person who had taken a loan. My father had presented the shop owned by him as a guarantee. Now, my father has expired and the person is not paying his EMIs on time. I am getting notices from the bank that if he fails to repay, it may put my property for auction. What should I do?
This is indeed an unfortunate situation and will probably need legal help to find out ways to help you. From the bank’s point of view and the generally accepted norms, the death of a guarantor does not extinguish his liabilities. The amount in default by the borrower is essentially a responsibility of your late father also, to repay. Hence as a legal heir, you inherit the assets as well as the liabilities of your father. In case the bank takes possession of the property, it will be within its legal rights to do so.
l My brother pledged my father’s property to take OD loan of `60 lakh. He could not pay the interest of `24 lakh. The bank has kept our property for auction at `65 lakh. My father died six months ago. We are three brothers and three sisters. Will the bank attach the borrower’s assets?
Here I understand that the loan was taken by your brother and your father jointly. As the owner of the pledged asset, your father was essentially a co-borrower. In such a situation, the legal heirs of an intestate person inherit the assets as well as the liabilities. The bank will take possession of the said property and will use the proceeds of the auction to extinguish all outstanding liabilities (principal and interest). All legal heirs of your father have equal rights to the remaining amount after the loan repayment.
l My cousin is buying a third home through a home loan. He had earlier taken home loans for both houses and repaid the amount. Can he take IT benefits for this house also?
Income tax benefits for principal and interest under Sections 80C and 24B can be availed for third loan. For the latter, if the house is self-occupied, the limit is Rs 2 lakh. If the house is leased out, then total interest paid on loan may be utilised for deduction under Section 24B.
(The writer is founder, AZUKE Personal Finance Advisory (www.azukefinance.com).)
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