Death of a loved one — it's always hard. But along with the loss, financial questions may also arise: what will happen to the debts of the deceased and who is obliged to pay them? In Mexico, the law clearly regulates these situations. Let's figure out what the heirs should know.
Debts don't disappear on their own
When a person dies, his debts do not disappear. The Mexican Civil Code states that all obligations are covered by the estate and are covered by the estate of the deceased before the heirs receive their share. That is, in fact, the debt will be paid from the inheritance.
In this case, the heirs are liable for the debts of the deceased only with the property of the inheritance, and not with their own money, unless they were guarantors or co-borrowers.
Credit cards
Many credit cards in Mexico contain life or credit insurance. Banks are required to provide complete information about this option.
If the insurance policy is linked to a credit card, the insurance company will pay off the debt. If there is no policy, the debt becomes part of the estate and the bank has the ability to claim payment from the deceased's estate.
Mortgage and life insurance
Mortgage loans always come with life insurance. The law obliges banks to provide insurance policies in the event of the borrower's death.
What happens after death:
- If the deceased had an insurance policy, the insurance company will pay the remaining debt on his behalf.
- If there were late payments, the insurer checks whether coverage also applies to these cases.
- Once the mortgage debt is paid off, the property on which the loan was issued is no longer encumbered with debt — it belongs entirely to the heirs, and they have the opportunity to freely dispose of it.
For mortgages issued by government agencies, the rules are the same.
Consumer and car loans
Debts for consumer goods or a car also have the right to be covered by insurance if this is specified in the contract. But this does not always happen.
If there is no insurance, the debt is absorbed into the inheritance. Then, to pay off the debt, assets purchased on credit, including a car, can be sold.
Taxes and alimony
The deceased's tax debts remain binding and are not written off. Representatives of the inheritance pay for them from the property.
As for alimony, the obligation ends upon the death of the obligor, but unpaid amounts may be recovered from the estate.
Joint and several debtors and guarantors
If the deceased was a guarantor or a joint debtor, the other parties to the contract continue to be liable for the obligations. The death of one of them does not free the others.
How are debts distributed?
Executor of the will:
- equals an inventory of property,
- repays all debts of the deceased,
- only after this does he distribute the remaining property among the heirs.
In other words: first the debts will be paid, only then the heirs will receive the remaining inheritance.
Additional ways to protect heirs
Death certificate — an official document that confirms that a person has died. Heirs, you should use it to:
- notify banks and credit organizations of death,
- contact insurance companies to activate policies,
- inform the tax authorities about the closure of obligations.
Once a death certificate is provided, the credit bureaus update the deceased's account information. This is required to:
- no one issued loans in the name of the deceased,
- the credit history of the deceased correctly reflected the closure of debts.
If heirs face problems with debt insurance or controversial actions of banks, the National Commission for the Protection of the Rights of Users of Financial Services (CONDUSEF) has the right to:
- help with complaints,
- explain the rights of heirs,
- assist in resolving issues with financial organizations.
The will determines who will receive the remaining property. If there is a will, the inheritance is distributed according to its instructions. If there is no will, the property is divided by law between relatives in the order of priority established by law. But a will does not affect the procedure for paying debts. Debts are always paid first so that property does not go to heirs with outstanding obligations.
In short, the debts of the deceased are covered by his property, insurance has the ability to facilitate payments, and the heirs are liable only to the extent of the inheritance.