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Loan Cosigner Passes Away

Question: 
What happens to a loan if the cosigner passes away? Does the loan go into default or need to be re-applied for?
Answer: 

Answer by Dan Persfull:What do your loan documents say? The death of a co-borrower/signer does not necessarily place the loan in default.

Answer: 

Answer by Lucy Griffin:Reg B contains a rule for open-end credit that prohibits you from closing the line under these circumstances unless you have evidence that the survivor does not qualify for the credit. You should treat closed end loans as current as long as the survivor pays. In most situations, with married couples as co-borrowers, any other treatment of survivors is likely to raise questions of marital status discrimination.

First published on BankersOnline.com 8/28/06

First published on 08/28/2006

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