What Happens to Unpaid Debt When the Borrower Dies?


Even in death, one remains accountable for settling their debts, as financial obligations are resolved through their estate. The estate encompasses all assets, both liquid and non-liquid, such as cash, investments, and properties. These assets are evaluated by legal entities in the event of bankruptcy or death.

Depending on the estate’s value, any outstanding debts, whether personal loans, mortgages, or other financial obligations, can burden beneficiaries if precautions are not taken. Philippine law, as outlined in R.A. No. 386 or the Civil Code of the Philippines, stipulates that debts persist beyond the debtor’s death, and financial responsibilities endure as long as there are assets to cover them.

Article 774 of the Civil Code asserts that succession is a means by which property, rights, and obligations of an individual are transferred upon their demise. Additionally, Article 776 emphasizes that inheritance encompasses all property rights and obligations that remain after death.

Consequently, upon death, assets like bank savings, investments, real estate, and other possessions may be inaccessible to family and relatives until debts are settled. A designated administrator, executor, or personal representative is responsible for settling balances using estate assets before beneficiaries can access their share.

The treatment of debt post-mortem also hinges on the type of financial obligation left behind.

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CashLoanPH Changed status to publish 09/04/2024