Handling a Car Loan After a Loved One Passes Away in Canada

Today’s blog post tackles a question we thankfully don’t have to consider that often. Namely, what happens to a car loan after death. It’s a question we were dealing with earlier this week and thought it would make an interesting blog post.

Our auto loan team explains what happens to someone's car loan after death and how to handle it.

Death and Debt

Regrettably, even in death, debt can continue to be a lingering issue. Even though the main borrower may no longer be with us, the debt still needs to be paid. When someone passes away, all their assets and their debts are collated and calculated to make up their estate. Everything they owned, all their savings, their house, car and all their lifetime’s achievements.

The executor of the will, or family lawyers will manage everything, including paying off the car loan with assets from the estate.If there are sufficient savings or investments, the auto loan will be paid from that. If the house, land or car needs to be sold to pay for it, the lawyer will handle that too.

If there is no will, it will fall to the courts to assign a responsible person to play the part of executor. It will be up to them to handle any outstanding debts and distribute any assets left over.

Partners & Auto Loans After Death

If a partner passes away and had an auto loan, the surviving partner may or may not be responsible for it. If you are named as a coborrower or co-signer, you are now responsible for paying the remainder of the auto loan.

If your name is not on the paperwork and the deceased was the sole borrower, you are usually not responsible for the debt. Some lenders will try to get you to pay so we would recommend seeking legal advice if that happens.

However, if the auto loan is secured on the car, which most are, the lender is entitled to repossess the car to make up the missed payments. The car is used as collateral so forms part of the loan contract. This entitles the lender to take the car to try to reclaim their money.

Again, if in doubt, seek legal advice.

If you want to keep the car while there’s still an auto loan outstanding, you will have to work with the lender. You can take out a loan to pay off the deceased’s loan and pay it until the car is fully paid for.

There’s a lot of law and legal stuff around death and debt. This blog post isn’t designed to provide legal advice, just an idea of what happens. If you’re in this situation and need help, we strongly recommend taking professional legal advice.