That was the question facing the bankruptcy Court in Colorado in a recent case involving the debtor, who is an elderly widow, and her daughter.
Because she suffers from advanced dementia, Jennie Maes neglected to make two monthly mortgage payments on her home. Her mortgage lender began foreclosure proceedings. On behalf of her mother, Juanita Maes filed a Chapter 13 repayment plan in order to halt the foreclosure and enter into an arrangement for repayment of the arrearages. She signed the petition as attorney-in-fact for Jennie.
Although Jennie had on two occasions given Juanita a general power of attorney to manage her affairs, all parties agreed that Jennie was at both those times already mentally incompetent. Because of her infirmity, the trustee contended that Juanita’s purported agency was invalid. The trustee sought to invalidate the Chapter 13 plan or convert the case to a Chapter 7 liquidation. Either outcome would have had severe negative consequences for Jennie because the home was her sole residence and only asset of any value. The mortgage on it was her only significant debt.
The Court first concluded that, despite the absence of an explicit requirement in the Bankruptcy Code, the signature of the debtor or someone acting on her behalf must appear on the petition and other filings. While a guardian or person in a similar position may sign, the Court noted that the authority of such an agent is normally a matter of state law, not the Bankruptcy Code. Despite her mother’s acknowledged infirmity, it did not appear than Juanita had ever initiated guardianship proceedings. Nevertheless, the Court ultimately appointed Juanita as guardian for purposes of the bankruptcy proceeding only.
Had the Court deferred fully to state law, it appears likely that the result would have been different. The lesson here is that any person who foresees the need to act on legal matters as an agent on behalf of a relative or other person – including but not limited to a future bankruptcy filing – should be certain that he or she either obtains a valid power of attorney or, if the person who is the subject of the power is already incapacitated, that she is appointed legal guardian. As in most states, a Colorado power of attorney may be either of immediate effect or only become effective if and when the grantor (the person giving the power) becomes mentally disabled. Indeed, one of the powers given to Juanita was of the latter type. The problem, of course, is that neither power was granted while Jennie was considered capable of understanding what she was signing. Assistance of counsel experienced in such matters in Colorado or other relevant state of residence is always advisable in such matters.