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What Happens to Personal Loans After Lender Died?

Jun 27, 2005 | | Comments Comments Off

Q: My mother passed away last year. She lent several thousand dollars to a woman who now says that she doesn’t have to repay because my mother is dead. I have the contract the woman signed to get the money, but this person told me, “Tough luck.” Can she get away with this?


A: Only if you let her.


The money is still owed to your mother’s estate unless she specifically wrote in the loan document that the balance would be erased on her death, or forgave the debt in her will or living trust, said Los Angeles estate planning attorney Burton Mitchell.


It doesn’t sound like that was the case, so the loan is considered an asset of the estate like any other asset.


“Tell the borrower, ‘Good try,’ ” Mitchell said.


You should write a letter to the debtor explaining that the loan is still valid and demand payment. If the woman refuses to honor her commitment, you can consider a variety of options, including hiring a collection agency or suing her in court for repayment. (If the amount is small enough, you may be able to pursue the case yourself in small claims court; otherwise, you probably should hire an attorney for help.)


But don’t delay. Each state has a time limit on how long a borrower can be sued over a debt, and you don’t want that limitation to expire before you have a chance to collect the money.

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