Avoiding bankruptcy as a person with a mental incapacitation

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Last Will and Testament: The Benefits of Estate Planning

After I had an accident and had to spend some time in the hospital, I decided that it was time to make a will and do some estate planning. After all, you never know what is around the corner, and I would hate for a family member to miss out on inheriting from me if I were to suddenly pass away. I worked with a lawyer to draft a will. We then discussed the various ways I could arrange my estate. I had been worried that I wouldn’t understand the different legal terms, but my lawyer took the time to carefully explain them. I am now much happier knowing that everything is in place. I decided to set up this blog to offer tips to other people who are in the process of planning their estate.


Avoiding bankruptcy as a person with a mental incapacitation

19 January 2017
 Categories: Law, Blog

If you are a person with a limited mental capacity or the carer of a person with mental incapacitation, it can be hard to ensure that bills are always paid on time and that the person does not take on more debt than they can pay. Here are some tips to avoid bankruptcy.

Sign a power of attorney

Most people with a limited mental capacity will have a power of attorney with a trusted person such as a parent or spouse needed to co-sign on any debts. (There is usually a degree of independence built in these arrangements so that smaller amounts such as buying bus fare or spending money can be done without specific permissions).  This person can also make other financial decisions such as removing money from savings accounts so it is important that this is a trusted person. If someone who is untrustworthy does obtain a power of attorney by deceit the family can apply to the court to get them removed, providing there is adequate evidence that they are unsuitable. 

Review accounts regularly

It is important to review account regularly so that any direct debits or regular withdrawals can be noticed and if necessary stopped. If these have been entered into without the permission of the power of attorney then you should immediately contact the debtors and explain that the debts must stop as there is not permission to withdraw this money. You should send a copy of the power of attorney with a written letter to enforce this request. 

Get legal advice

If the debts do not cease being drawn from the account then you should contact a lawyer to help you commence legal proceedings. You can also bring a claim for any amounts withdrawn to date. Many lawyers will do this work pro-bono (for free) and you may be able to find a low cost or free lawyer through a disability services agency. 

You can also lodge a complaint through the Financial Service Ombudsman, who can review the company and ensure that they are not treating other consumers unfairly as well. 

The law recognises that people with a limited mental capacity will need some extra support when entering into financial arrangements. Be sure to get a power of attorney drawn up if you are in this situation and regularly review accounts to make sure that no unplanned transactions are occurring, so that bankruptcy can be avoided