If your loved one is experiencing financial difficulties that can be helped by filing bankruptcy but cannot file the petition on his or her own, there are a couple of ways you can legally step in and do it for them. Here's what you need to know about filing bankruptcy on behalf of an incapacitated person.
Power of Attorney
Possibly the easiest way to obtain the authority to file bankruptcy on another person's behalf is to have the person sign a power of attorney. This is a legal document that grants one or more persons the power to make decisions for the individual who signed it. The power of attorney can be narrow (granting power for one specific act) or broad (allowing the person to perform any legal act on behalf of the individual).
The immediate issue you'll run into going this route is the person must have signed the document before he or she became incapacitated; otherwise, the court will not accept it on the grounds the person didn't know or understand what he or she was signing. The bankruptcy judge may require you to furnish proof your loved one was of sound mind when the individual signed the power of attorney to protect the person's rights.
The power of attorney must specifically state you have the authority to file bankruptcy on the person's behalf or be broad enough to cover this action. For example, a woman was able to file bankruptcy on her father's behalf because she had a general power of attorney that granted her a wide range of powers.
If the power of attorney does not give explicit permission or is too narrow, the bankruptcy trustee can object to the filing and the case may be dismissed. It's best to contact the trustee who handles bankruptcy cases in your district and ask whether or not your power of attorney is sufficient to proceed with a bankruptcy petition.
Order of Guardianship
Also known in some states as conservatorship, guardianship is similar to a power of attorney in that you are given the authority to make decisions on behalf of the incapacitated person. However, this authority is granted to you by the state rather than the individual. This is the route you would take if your loved one did not assign power of attorney to you and cannot do so in his or her current state.
To obtain a guardianship, you would petition the court to appoint one. You can name yourself, a different person (or multiple people), or an agency as the preferred guardian of your loved one. For instance, if you and your sibling want to both be your parent's guardian, you would put both your names on the petition.
The powers of the guardian are decided by the court, and many courts will generally only assign what is necessary to obtain the outcome the petitioner desires. The court may only grant you power over the person's financial affairs so you can file bankruptcy on the individual's behalf but not his or her medical affairs, for example.
The main drawback to applying for guardianship is it can take several months for the court to complete its investigation and render a decision. If you have an emergency situation (e.g. preventing foreclosure), you can be awarded temporary guardianship, which usually lasts 60 days to 90 days depending on the state.
Another issue you will need to consider is some courts require financial guardians to submit regular reports accounting for the individual's finances. This is to reduce the risk of theft or mismanagement of the incapacitated person's money and assets by the guardian. The court proceedings are also public record, so you need to be prepared for possible invasions of privacy.
At the end of the day, you have to do what is best for your loved one. For more information about filing bankruptcy for an incapacitated person or to file a petition with the court, contact attorneys with knowledge and experience in this area.