The very title of my this post may ring bells in the ears of younger generations, who have never defaulted in loan repayments but may get a bad credit score in the eventuality of the natural or untimely demise of their parents or forefathers – who used to be chronic defaulters during their lifetime. To understand the problem you need to read this article up to the dead end.
What happens on the death of Chronic Defaulter of Bank Loans?
The following possibilities arise on the immediate death of any chronic defaulter:
- Sensible legal heirs repay the loan collectively or even get the loans settled. In such a scenario the settled accounts will never appear in the credit reports of the legal heirs if they were neither principle borrowers nor guarantors. The bad credit report of the deceased defaulter will get buried in the system without any reference to the legal heirs.
- In case legal heirs happen to be either principle borrowers or guarantors, then they should neither opt for settlement nor for waiver as such settlement and waiver will haunt their credit reports and no bank will get the status changed from “Settled” to “Closed and Clear” in CIBIL or other rating agencies like Experian, Equifax etc.
- However in case, the legal heirs get the loans restructured and get the loan outstandings transferred in their name after closing the earlier loan accounts in the names of legal heirs, then they can create good credit history over a period of time by repaying the loans as per agreed terms and conditions.
- If the legal heirs do not pay any heed to the liabilities of their deceased parents then the lending bankers will sue them as the legal heirs of the defaulters and the banks may also report such loans with personal IDs like PAN, Aadhaar, Voter ID, Driving License or Passports of the legal heirs resulting into immediate change in their credit rating and scores.
- Now the question arises if the legal heirs can disown their parents to disown the liabilities of their parents? Yes, of course, but they will also be not entitled to the moveable or immoveable assets of their deceased parents. If at any time the legal heirs have put up their papers to a) claim the contents of locker hired by their parents b) claim amounts lying in banks, FD’s, Insurance Claims etc c) division or transfer of property owned by their parents – then they will forgo their One Time Right (OTR) to disown their parents.
Today the banks are not tagging the personal ID’s of the legal heirs with the defaulted loan accounts of their parents but the day is not far away when the banks will be asking for personal ID’s of legal heirs too while sanctioning or renewing the loan or even may go the extent of taking the consent of the legal heirs who are majors or who attain majority. This should be taken as an ALERT message by the future generations before making any claims to moveable or immoveable assets of their deceased parents. The loan agreements by all the lending institutions legally bind the legal heirs, legal heirs of legal heirs and so on to repay the debt due towards their forefathers.
Are your facing any issue with your CIBIL Report or Credit Report, meet this CIBIL Consultant with prior appointment to seek guidance to command an excellent Credit Report.