The pledgor’s death does not automatically extinguish an outstanding secured debt. The pledged item is now connected with administration of the deceased owner’s estate, while the creditor’s previously established security right must still be respected.
The key issue is the proper mechanism of realization. Mere possession does not, in this ruling, authorize the creditor to treat the asset as ownerless or sell it unilaterally without the appropriate authority.
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Death of the owner and the secured debt
Kitab al-Rahn: Misuse, Loan Back, Liability and Death of the Pledgor
The pledgor’s death does not automatically extinguish an outstanding secured debt. The pledged item is now connected with administration of the deceased owner’s estate, while the creditor’s previously established security right must still be respected.
The key issue is the proper mechanism of realization. Mere possession does not, in this ruling, authorize the creditor to treat the asset as ownerless or sell it unilaterally without the appropriate authority.