There is no reported case here in Massachusetts settling the issue of whether one can file bankruptcy on another’s behalf with a durable power of attorney. However, it is likely that this would be allowed if the debtor was incapacitated and unable to participate in their bankruptcy case due to health or disability.
We tend to be asked about this issue when elderly parents with dementia or Alzheimer’s disease have granted a power of attorney to a son or daughter. The “attorney in fact”–the person granted the power of attorney–wants a discharge of the parent’s debts due to creditor harassment and lawsuits. There is also at times an incentive for children or other heirs to seek a bankruptcy discharge for their parents when they are elderly: if the parent dies with undischarged debt, their creditors will have claims against their probate estate. This might require the sale of a family home to satisfy debts and, in any event, would reduce the amount that children or other heirs would otherwise get under a will or via the laws of intestacy.
So, with this in mind, is a POA-based bankruptcy possible in Massachusetts? As the Vermont Bankruptcy Court put in in 2001:
It appears well-settled that a bankruptcy case may be commenced through an attorney-in-fact under appropriate circumstances. An attorney-in-fact may commence a bankruptcy case so long as the debtor qualifies for relief under 11 U.S.C. § 109, the commencement of the case is within the scope of the specific language contained in the document granting the power of attorney, and such action by the attorney-in-fact does not constitute the practice of law.
In 1999, the New Hampshire Bankruptcy court also allowed a POA bankruptcy and set out some detailed requirements. Essentially, it said that:
1. The petition must be properly executed by the attorney in fact in his representative capacity.
2. A copy of the durable power of attorney must be attached to the petition which serves, among other things, that the attorney (at law, not in fact) for the debtor has made certain inquiries regarding the power of attorney and has no reason to believe that it’s invalid.
3. The “attorney in fact shall appear at the first meeting of creditors and the trustee shall require the attorney in fact to state on the record the reasons necessitating the commencement of the case under a power of attorney.”
4. The petition must be served on the debtor.
There are reasonable safegaurds meant to protect the integrity of the bankruptcy system and ensure that attorney-in-fact-initiated bankruptcies are only filed when necessary. Although, the Massachusetts Bankruptcy Court has not gone on record as allowing POA bankruptcies, it would likely follow the majority of courts, but require a showing of necessity like the New Hampshire court did.
One novel issue here in Massachusetts, however, is that we repealed our durable power of attorney law in 2009 and replaced it with a customized version of the Uniform Probate Code. At least one attorney commentator believes that this invalidates pre-2009 POAs. Consequently, it may be prudent to update your POA, if possible, before filing bankruptcy based on one. If the debtor is already incapacitated, however, this may be impossible. It is my opinion that the Massachusetts Bankruptcy Court would not dismiss a bankruptcy case due to a pre-2009 POA. However, if it did, the appointment of a conservator or guardian–a step certain to increase complexity and expense of a case–would be necessary to proceed with a bankruptcy case on behalf of the debtor.