Bankruptcy & Future Bills ?

[pjm333]

My Mother is in Hospice care for 6 months now and was in nursing homes 2 yrs prior and her medical bills are over $100,000. There are obviously going to be many more medical bills to come so I am thinking of bankruptcy for my mother. I am her son & Power of Attorney. I plan on speaking with a bankruptcy attorney but is bankruptcy just for prior bills or will it also cover future bills ? Thanks !

[LadyInTheRed]

Bankruptcy only covers bills for services rendered prior to BK. It is usually recommended that people wait until they have completed their care before they file BK.

Since your mother is in hospice care, I suspect her need for care will last the rest of her life. Do you realize that any debts in excess of the value of her assets will die with her? Does she have exempt assets that you are trying to save for her beneficaries?

[pjm333]

Bankruptcy only covers bills for services rendered prior to BK. It is usually recommended that people wait until they have completed their care before they file BK.

Since your mother is in hospice care, I suspect her need for care will last the rest of her life. Do you realize that any debts in excess of the value of her assets will die with her? Does she have exempt assets that you are trying to save for her beneficaries?

LadyInTheRed,
Thank you for your response. I do realize that & the only asset she has is a condo which is half in my sisters name so her half will go towards her dept. She does have life insurance policies "term" which there is no cash value so I'm told they cannot be touched. I was trying to protect her portion of the condo in filing bankruptcy, what are some examples of "exempt assets" Thanks again for your help !

Patrick

[AngelinaCat]

What state is your mother located in?

[LadyInTheRed]

Each state has a list of assets that are exempt from collection by creditors. (Exemptions do not apply after death.) Those exemptions apply when you file BK. Some states also allow you to choose to use Federal Exemptions. Some state's exemptions are more generous than others. In a Chapter 7 liquidation, the debtor can keep her exempt assets. Non exempt assets are liquidated to pay creditors. Most states have a homestead exemption to protect equity in a debtor's home. Google [name of state] bankruptcy exemptions" to find the exemptions for the state where your mother lives.

Do you know how title to the condo is held? If it is joint tenancy, your sister may not be liable to the creditors and it may be that all the creditors could get is a security interest in your mother's half of the property. This will depend on state law, so you may want to consult with an estate planning attorney if you haven't already.

Make sure the beneficiary designation on the life insurance is up-to-date. If a former spouse is named and there is no named contingent beneficiary, your mother's estate could be the default beneficiary which could allow the creditors to get at the insurance proceeds.

Do some reading on this site to learn about the basics of bankruptcy. What you learn here will help you make the most out of your consultations with attorneys.

[pjm333]

AngelinaCat & LadyInTheRed,
My Mother is located in Westchester, NY and thank you for explaining exempt assets to me. I have to look into how the condo is held and the beneficiary designation is up to date. The idea of bankruptcy is new to me and I definitely need to speak with an attorney but just learning & learning what questions to ask etc. Thank you very much for your help !
Patrick

[LadyInTheRed]

Here's a summary of NY exemptions: http://www.legalconsumer.com/bankrup...T=NY#homestead

Looks like your mother can exempt $150K of her interest in the equity of the condo.

[pjm333]

LadyInTheRed,
Thanks again for every thing.....

Patrick

[SMinGA2]

My understanding of life insurance is that when the policy is enforced, it becomes an asset of the beneficiary. It does not become part of the holder's estate.

[pjm333]

SMinGA2,
Thank you, I have talked with 3 different Attorneys "free consultation" and they said the same thing to me. Thanks again !
Patrick

[TBA]

SM, that is correct if a beneficiary is specified in the policy. If there is no named beneficiary (or in some group policies, they specify a certain payout hierarchy - minor children first, then surviving spouse... etc), it becomes the property of the estate. Otherwise who/how would the insurance company know to pay?

Unless there is a pour-over will paying all assets to a trust. But that is another story, and it depends on what state you are in, and what their probate laws require when it comes to trusts.