Bankruptcy for parents and caregivers for the disabled – YOU ARE SPECIAL

I have written about this before, but some recent posting on Facebook makes me think I have to do it again.  I belong to a Facebook group for parents of children with a certain genetic microdeletion.  Several parents posted about cuts to their states’ budgets that are having direct impacts on their children’s services and forcing them to make very hard decisions about what they can do for their children.  I am afraid some may be forced into insolvency when the finances come crashing down, even if they make good salaries.

The only upside that I can see in this situation is that if a bankruptcy becomes necessary in order to handle the finances and fix a bad situation, the bankruptcy code provides consideration of the special circumstances and extra costs that parents and caregivers face in caring for our special ones.

The means test that determines whether one can file for Chapter 7 allows one to deduct the expenses of day care, medical costs and costs incurred for the support of the elderly and disabled.  Where a child or family member has significant medical or other related needs, the strain on a family’s finances can be significant.   11 U.S.C. §707, which governs the determination of allowable expenses provides that the debtor may deduct from their income:

“actual expenses paid by the debtor that are reasonable and necessary for care and support of an elderly, chronically ill, or disabled household member or member of the debtor’s immediate family (including parents, grandparents, siblings, children, and grandchildren of the debtor, the dependents of the debtor, and the spouse of the debtor in a joint case who is not a dependent) and who is unable to pay for such reasonable and necessary expenses”

This can help in both Chapter 7 and 13 cases, because it can either get a family into a Chapter 7 who would otherwise be forced into a Chapter 13 due to income issues, or it can reduce the amount required on a monthly basis to repay creditors in a Chapter 13.

So what counts?  Medical costs, therapy costs, extra caregiver time, travel costs to specialists, medically necessary equipment…if you spend it, it may be deductible to reduce income for the purposes of means testing.

Parents and caregivers for special needs persons face an ever-increasing burden emotionally and financially.  If that burden is leading to financial collapse, you need to contact an experienced bankruptcy lawyer to help you make best use of the statutory provisions that can best benefit you and your family.