07 Jan Death and Bankruptcy.
Unless you are a mortician most people do not like to think about death, especially when considering filing bankruptcy. However there are times when death comes into play whether it be the death of the debtor or the death of a loved one. Inspiration for these blogs come from the everyday experiences in my practice and life. The same holds true for this blog.
This week a friend of mine passed away. Because her passing was unexpected and sudden and it has given me pause to think of ways of improving my practice and assist my clients in planning for the unexpected. She like many thought she had time to get her personal affairs in order with respect to her final wishes. Unfortunately the universe had a different time line than she did. So it is in her honor that I write this blog.
When one is in bankruptcy and dies they still may be eligible for a discharge whether it is a Chapter 7 or a Chapter 13. If the debtor dies after the filing of the bankruptcy they still may be eligible for a discharge of their debt. This discharge of debt will assist loved ones in preventing debt collectors from attempting to collect from one’s estate.
The difference between the Chapter 7 and Chapter 13 Bankruptcy is that in a Chapter 13 you must request a Hardship Discharge. Kent Anderson has written a great article explaining the three prong test for a Chapter 13 hardship discharge. As Kent has eloquently outlined the hardship discharge there is no need to reiterate this point.
The point of this blog is to illustrate that bankruptcy is a great opportunity to get all of one’s personal affairs in order. To prepare for bankruptcy you have to gather so much information and paperwork that it makes sense to go ahead have your estate planning documents drafted. This way your entire financial house can be placed in order. If you are not in bankruptcy and do not plan to file for bankruptcy you still should get your personal affairs in order now before it is too late.
Our lives our so busy and stressed filled that often we do not stop to think what will happen if I die today. Who do I want to take care of my children? Where do I want to buried? Who do I want to make my medical and financial decisions if I have to be hospitalized? How will my family be able to shut down my virtual online life? The are many questions that we put off until tomorrow hoping to not have to face this decision with respect to our loved ones or ourselves.
At a minimum everyone who is over the age eighteen should have certain documentation:
- A Last Will and Testament or Trust. These documents will advise your loved ones what you want done with your worldly possessions as well as your final requests. The Will itself can be complex or simple as Chief Justice of the Supreme Court Warren Burger’s will.
- An Advanced Directive or Living Will that explains what your requests are when your medical condition is critical.
- A Durable Power of Attorney so that someone may make financial and medical decisions for you if you are incapacitated.
- A list of all your insurance policies and all the policies should be placed together.
- All bank accounts should have someone listed as the person to receive the account upon transfer upon death. This is also known as TOD. All bank accounts should be listed as well as the user name and password for any online accounts.
- All safety deposit boxes should be listed.
- Transfer upon death should be listed on all your vehicles and copies of all titles or loan paperwork should be gathered.
- If you own a home you should see if your state allows for a beneficiary deed.
- List all online websites, social networking sites and accounts with the user names and passwords.
- List the user name and passwords to all your computers.
- A lit of friends that you would like contacted upon your passing.
- I also recommend that that you write a letter to each loved one especially if you have children to give your thoughts along to them directly after you pass. To this day I have a Christmas card that arrived 3 days after my father passed. It was the last time I had heard from my father and the first time he truly expressed how he felt. I have that card framed and in my office where I view it everyday. I consider it the greatest gift that my father had given me.
- Place all the above documentation in one spot such as a safety deposit box. Then let someone know where that safety deposit box is located.
Estate Planning is a specialty just like bankruptcy. Therefore you need to seek the advise of an attorney who is trained in estate planning. Although it will cost to have this service provided, the peace of mind that your family members receive is priceless. Again many of the documents you need to gather to file for bankruptcy are the same documents that you need to gather for Estate Planning.
The American Bar Association provides information so you can begin to educate yourself about estate planning. You may also want to check the bar association in your particular state to see if they provide state specific information and/or forms.
It is critical that you speak to your family members or friends now about your wishes. Do you want to be cremated or buried? Where do you want to be buried? Do you want a funeral, wake or a celebration of life? Luckily for my friend she had just discussed with her children what she wanted to take place in the event of her passing. This discussion alone has provided comfort to her children as they can abide by her wishes. Does your family know what you want when you pass?
Death is never a comfortable subject but I am urging you to prepare for your passing now and not procrastinate until it is too late. I too need to take these steps so do not feel like you are the only one. Although I have insisted on Estate Planning for each member of my family I always seem to be too busy to plan for my own passing.
Remember that knowledge is power and the more knowledge you have about handling your affairs when you die the more power you will have in controlling how your final affairs are to be handled. This in turn will provided comfort to your loved ones in their time of loss.