Do Heirs Have to Repay Loans Taken by Their Parents? Here’s What Indian Law Says
Many families face uncertainty about loan repayment after the death of a borrower. Under Indian law, the liability of heirs to repay loans taken by deceased parents is limited and clearly defined.
Heirs’ Responsibility and Its Limits
- If property is inherited: When heirs inherit property such as a house, land, or money from their deceased parents, they are legally required to repay the loan only up to the value of the inherited assets.
- If no property is inherited: If heirs do not receive any property, they are not obligated to repay the loan from their personal income or assets. Banks cannot legally force them to do so.
Loan Repayment Rules Based on Loan Type
- Unsecured loans: For personal loans or credit card dues without collateral, heirs are not personally liable. If the loan is covered by insurance, banks recover the amount through it. If not, the loan may be classified as a non-performing asset (NPA).
- Secured loans: For loans backed by collateral such as property, vehicles, or gold, banks have the legal right to recover dues by auctioning the pledged asset. Heirs may continue repayment only if they wish to retain the property.
Role of Co-applicants and Guarantors
- If heirs have signed the loan as co-applicants or guarantors, they are fully responsible for repaying the loan, even after the borrower’s death.
Legal Safeguards for Heirs
- Banks are not permitted to harass or threaten heirs for loan recovery.
- As per Section 50 of the Code of Civil Procedure (CPC), heirs’ liability is restricted to the value of the property they inherit.
Experts advise heirs facing pressure from banks to assert their legal rights and seek professional legal guidance if required. For official guidelines, borrowers and families can refer to information available on the Reserve Bank of India (RBI) website.
Disclaimer: This article is intended for general awareness only. For specific legal advice, consultation with a qualified legal professional is recommended.
