A grim and tragic question perhaps, but I'm curious:
What happens when a person that co-signed on a loan dies? Is the co-signer's estate potentially liable until the loan is paid off, the same as if the co-signer had borrowed the money themselves? Or, does the responsibility for the loan die with the co-signer? Does the bank/lender take on that risk?
Unless there is a specific clause in the contract, then yes, it would fall to the estate.
Just as assets tend to live on after you, so do your debts; or in this case, your debt-guarantee on behalf of someone else.
Unless your contract says otherwise, the estate has primary responsibility, but the cosigner is responsible for the remaining balance.
There is never a good reason to co-sign for a loan. Don't do it.
Yes, I saw this happen once before. The person that died had a life insurance policy that easily covered the obligation. If this a concern to you, then consider the cost of a term life policy.
I did a Google search on co-signer death, which provided a lot of results that looked useful. The top result (from the Boston Globe) basically says "it depends".
