The corona pandemic hit many families hard. Losing a loved one is hard enough. But if you then have to deal with debts left behind, there is unfortunately not much time for appropriate mourning. Because open loans or other debts come with the inheritance, this can initially overtax and awaken existential fears.
Take precautions: how to secure a loan
In order to prevent this, you can have your credit secured. This prevents the debt from being passed on to other family members if the borrower is unable to continue paying.
Securing credit with residual debt insurance
One of the most popular hedging options is residual debt insurance. Such insurance takes over the outstanding loan amount if the borrower is no longer able to service it. This includes reasons such as incapacity for work, unemployment or death. Many banks recommend taking out residual debt insurance when taking out a new loan. However, this is not mandatory.. Residual debt insurance is also always tied to a single loan. If there are several current loans, each loan must be insured individually.
If interested in residual debt insurance, it is advisable to obtain and compare accurate quotes. These insurance premiums are based on the term, loan amount and age of the insured furthermore, they are not standardized, which is why the individual insurance policies of the various providers often differ greatly in the scope of benefits, for example, in terms of reasons for insolvency. Inform yourself here thoroughly and check exactly to what extent a credit protection with a residual debt insurance is worthwhile for you.
Term life insurance: the classic protection
You always have the option of securing your debt with term life insurance. Because this insurance is very flexible and can also be taken out independently of a loan. This also gives a greater margin for the insured amount and the term.
Term life insurance acts primarily as a safeguard for the family in the event of the borrower's death. But also other debts that exist independently of the loan can be settled with the money from the insurance policy.
However, such insurance does not offer protection in the event of incapacity for work or unemployment.
If the loan was not secured: who pays for the debts
What happens if it is too late for protection? Must the family or relatives of the deceased to pay for the debt and repay it? In principle, the debts do not expire but continue to exist and are transferred to the potential heirs. To avoid a debt trap, however, there are several options for surviving heirs.
Reject the inheritance
In principle, every heir has the right to disclaim the inheritance within six weeks of the death and not to accept it. However, you should be aware that this means that you are rejecting the entire inheritance. So it is not possible to disclaim the debts but inherit the possessions. An "all or nothing" rule applies here. If an inheritance is rejected, the relatives will not receive any of the deceased's possessions.
If the inheritance is to be disclaimed, this must be done explicitly. The heir must therefore take action himself. If this is not done within six weeks, the inheritance is automatically considered to have been accepted.
If there is no will in which the inheritance is clarified, then the legal succession takes effect. In this case, the state assumes that you know the order of inheritance and are aware of the inheritance claim. Therefore, they are not explicitly informed about the inheritance claim. If the inheritance is disclaimed, it passes directly to the next person in the order of succession. In the last place of this order is the state.
Whether it is necessary to disclaim an inheritance or whether the property can pay off the debts requires a case-by-case examination. In this case, it is advisable to seek professional support, for example from a debt advisor.
Order estate administration or estate insolvency proceedings
If the inheritance is not disclaimed and it only becomes apparent at a later date that the inheritance involves a lot of debts or is even overindebted, there are further options for limiting the liabilities.
If the estate, i.E. The inheritance, is very unclear and it is not exactly clear what the total amount of debt is, an administration of the estate can first be applied for. This is applied for at the probate court. It serves to satisfy the creditors in case of sufficient inheritance and to limit the liability of the heir.
If it turns out in the course of the proceedings that the inheritance is not sufficient to satisfy creditors, estate insolvency proceedings may again be ordered. In this way, the heir avoids an obligation to pay compensation. In this case, such proceedings should be filed as soon as possible with the competent insolvency court.
Plea of insufficiency: refusal to satisfy creditors of the estate
If the estate is not even sufficient to cover the potential costs of probate administration or probate insolvency proceedings, the heir is entitled to apply for a plea of indigence. This means that the payment of the creditors of the estate (z.B. The bank) to the extent that the estate is insufficient to cover. This is another way for heirs to protect their private assets if the estate is heavily overindebted.
You are always on the safe side if you think about what might happen in the event of insolvency when you sign a loan agreement.. But even in the case of an inheritance, which is associated with many debts, there are several ways to protect your private assets and escape a debt trap. In this case, active action must always be taken in order to avoid personal liability. The significance and complexity of the situation is great, so that it is advisable to obtain an expert legal opinion.