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Dying Octogenarian’s Secret Drives Spouse Into Bankruptcy

BankruptcyBy Craig D. Robins, Esq.

 Husband Used Bankruptcy to Eliminate Debt Fraudulently Incurred by Deceased Wife
 
One of my most interesting Long Island Chapter 7 bankruptcy cases was a number of years ago.  It involved an 80-year-old widower who learned some incredible, disturbing and unfortunate secrets about his wife’s finances while she was on her deathbed.
 
By using some creativity and the filing of a consumer bankruptcy case, I saved the day for my client.
 
Filing Bankruptcy Proved to Be the Ideal Solution to an Unusual Problem
 
Just a week after his wife had died, the widower, accompanied by his adult children, consulted with me about a very serious debt problem he had only discovered two weeks prior.
 
His deceased wife, also 80 years old, had been in the hospital, diagnosed with a terminal disease.  When the widower walked into her hospital room to pay her a visit a week before she died, he caught her trying to shove some papers under her covers.  These were credit card bills and lawsuit papers.
 
Wife, Unbeknownst to Husband, Incurs Substantial Debt in His Name
 
As it turned out, for years, the wife, who had handled all of the family’s finances, opened numerous credit card accounts in the husband’s name by forging his signature.  She did not tell him about this.  She had all the credit card bills sent to a post office box.
 
Just a week before she died, the husband learned that not only was he obligated to pay over $60,000 to credit card companies for debts he had absolutely nothing to do with, but several of the credit card companies had even commenced litigation against him.  The widower wanted to know what to do.
 
Although we discussed disputing some 15 different accounts, or defending the various suits that had been brought in state court, I decided that the easiest and most efficient way to resolve the problem would be to file a Chapter 7 bankruptcy.
 
Using Bankruptcy to Resolve the Problem
 
The tricky aspect of this case was that the debtor-husband owned his entire Locust Valley home free and clear of all liens, far exceeding the homestead exemption.  The unprotected home did not concern me because my strategy was to totally eliminate all creditors. 
 
I prepared the bankruptcy petition and listed the various credit card accounts totaling $60,000, but indicated that each and every credit card debt was disputed.
 
The bankruptcy court assigned the Chapter 7 case to Long Island bankruptcy trustee Kenneth Kirschenbaum.  He almost fell off his chair at the meeting of creditors when he learned that there was a valuable house that was almost totally non-exempt.  Keep in mind that at the time of filing, the homestead exemption was only $10,000 and the house was worth several hundred thousand dollars.  The trustee immediately began salivating over the prospect of administering a nice asset case.
 
However, I told the trustee, “not so fast, Cowboy” (or words to that effect).  I explained the situation and said that I would be filing an application for a “bar date” in which creditors would be notified that they have only so much time to file claims.  I then told the trustee that I would be filing objections to every filed claim.
 
Trustee Can’t Administer Bankruptcy Estate and Debtor Gets Discharge
 
Well, it turned out that even though there were 15 creditors, only six of them filed claims. (Remember, this was many years ago when creditors often neglected to file claims).  I then successfully objected to every claim, on the ground that the husband did not incur them.
 
That left a bankruptcy estate that contained a very significant non-exempt asset — the house — but with not one single claim that could be paid.
 
Trustee Kirschenbaum, who was not too happy, had no choice but to close the case as a “no asset” case because there were no creditors who he could pay.  The debtor, meanwhile, received his Chapter 7 discharge, kept his home, and eliminated all of the headaches caused by his wife’s secret financial life.
 
By thinking out of the box, I utilized an unorthodox solution to an unusual debt problem and achieved a great result for my client.
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About the Author.  Long Island Bankruptcy Attorney Craig D. Robins, Esq., [1]is a regular columnist for the Suffolk Lawyer [2], the official publication of the Suffolk County Bar Association [3]in New York. This article appeared in the October 2009 issue of the Suffolk Lawyer. Mr. Robins is a bankruptcy lawyer who has represented thousands of consumer and business clients during the past twenty years. He has offices in Patchogue, Commack, Woodbury and Valley Stream. (516) 496-0800. For information about filing bankruptcy on Long Island [4], please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com [4].
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