What happen if my sisters and I inherited a property that has a significant equity line of credit attached to it?

We have been making a little over minimum payments on the loan and renting the property out. Probate closed 3 years ago. Are we obligated to pay it back? The loan is for $44,738.47. I heard that if the bank

didn’t ask to settle the debt during probate and the loan agreement is in my mother’s name they missed the deadline during probate to settle the debt. Is that true? The house has been transferred into our names and we’ve collected rent since her death several years ago.

Asked on November 30, 2018 under Real Estate Law, Ohio

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 1 year ago | Contributor

The good news is that you and your sister are NOT personally liable for the loan, unless you refinanced it in your own names, or guaranteed or co-signed it. The other good news is that if a claim was not put in before probate was closed, the bank cannot seek the money from the estate, either.
The bad news is that the lender is still entitled to foreclose if the loan is not paid off IN FULL.  When your mother passed, if she was the only person on the loan, the loan became due: when a person passes away, their mortgages, HELOCs, etc. must be paid. The fact that the lender cannot seek the money from the heirs or, at this point, the estate does not change their right to take the property if not paid; the security interest in the home has not been invalidated. So you have to pay the loan off either entirely, or according to some schedule which the bank/lender voluntarily agrees to, or else lose the home. And you cannot transfer the home without paying off the equity line.


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