Should my aunt file for bankruptcy, although she owns a house?
I am a 73yr old senior myself. My main concern right now is a 89 yr.old aunt who asked me about three years to take on the responsibility of durable POA since I am the closest relative other than her 88 yr old sister who is being cared for by her son.
My aunt never married and has no children. She was living alone in a third story house at the time. I was able to get her into subsidized living for seniors. She loves her place. She has been mentally sharp but I have been seeing signs that might be related to dementia which her doctor diagnosed this year. She made me her beneficiary of her property. My granddaughter and I worked for a long to clear up her old place which was like a dumping ground where she had mail and papers piled up over the years. She was reluctant to let anyone visit because of that.
I have a real estate agent ready to sell the place once she and I give the word. Several things bother me-- Her present living place is aware that she owns property and they have stated that they will raise her rent once the place is sold. She gets a small pension which is the only source of income. Would the income from the property make her ineligible for some senior programs for low income seniors? Also, in the past, she has run up a lot of debt with credit cards. I was able to get her to turn over to me all but two which I thought she might need. At the present time almost half of her pension is taken up with repaying creditors.
I am able to monitor her checking account so I know her spending habits. Even though I tried to warn her, she did give out credit card information over the phone and these people have withdrawn funds that she said she agreed to. I set up a meeting and we met with the Bureau of Consumer Protection, They only took down information and said they would call us. That was a month ago.
Someone said that she could be declared bankrupt to ward off the creditors, but what would that mean in the sale of the house? She really needs the money to pay off the bills.
As you can see, I need advice, as I don't know what is the best thing to do. I want to protect her, but I don't know what is best. Also, she is very independent and reluctant to give up any control since she feels she can handle things herself.
Expert Answer
You have asked about filing for bankruptcy to pay for care for your aunt. The picture you describe is complicated and bankruptcy may not be the best way, but it is an option. However, first things first.
Your aunt has dementia, is at very high risk for financial elder abuse, if indeed this is not going on right now, and you, as power of attorney need to act immediately. First, remove all but a small amount of money from all bank accounts with your aunt's name on them. Put her funds in a separate account over which you have exclusive control. Leave her only a little, what she can use for incidentals. Let her know that you have to do this so she will have money to live on. Keep excellent records of all expenditures you make for her benefit. Keep her money totally separate from yours.
Cut up the credit cards. She has no business using them when she doesn't have judgment about money and is putting herself in danger giving out information about them. Cancel the credit cards with the credit card companies. If you need one for her care, put it in your name as her DPOA and do not let her use it. She may think she can handle things on her own, but what you're telling me in your question is that she can't. No need to prolong the inevitable. Take control now and don't make any excuses for not doing so.
The Bureau of Consumer Protection may or may not help. But you can take over and stop waiting for someone else to make these decisions. If your aunt has been diagnosed with dementia and you have or can get a letter to that effect, I would try to negotiate down the debt with the explanation that she didn't realize what she was doing and that others, the creditors, have taken advantage of her. Ask for the debts which are from shady people be eliminated or reduced. Don't just blindly pay them. See if you can get rid of them by negotiation. If you need a lawyer's help with this, get it. Spend her money to get legal advice and don't hesitate.
Getting professional advice also applies to the tax, real estate and questions about bankruptcy and the living situation she's in. Get legal advice from a competent and well reputed elder law attorney about when it's the right time to sell the home. When it's time, don't wait for your aunt's approval. She is not a competent person and you can't rely on her judgment. Look where her judgment has gotten her lately. Use your own judgment, combined with good advice from expert persons and do what you think is best. If a bankruptcy lawyer advises taking bankruptcy, go ahead. If other options exist, consider them also. Whatever you do, base your decisions on reliable advice from experienced professionals, not on what your friends or family tell you to do unless they are the professionals.
It is unfortunate that your aunt is independent and thinks she can handle things herself. She can't. You have to face the resistance and anger she is likely to demonstrate. It's too bad, but her independence has been stolen by her dementia. Be respectful, but firm. Enlist the help of any good friend, family with good judgment, clergy or other person whom she trusts when you have to deliver the bad news. You do not have a minute more to waste. Your aunt appointed you to be her agent on the DPOA. You now have the responsibility to get moving and exercise your right to take over the finances.