In order to apply for Medicaid, Mom (who is in her 90's) paid for a pre-needs funeral contract with a funeral home a year ago. This money was supposed to be put in an Irrevocable Trust to cover funeral costs at her passing. We had questions when we could not account for Mom's funds or the Trust account they were put in. Recently we found out that the funeral home has enormous debts and has filed for Chapter 11 bankruptcy. Because of the bankruptcy, we are told there's nothing we can do to remove Mom's funds from this company and put it in another Trust or another funeral home. We have major concerns about their business practices. Also, we are afraid that due to the amount of debt this company owes, that they will be filing for Chapter 7. Any suggestions?
So, what it is saying is that my State of NJ requires that Funeral Homes are required to deposit prepaid funeral money into a Trust that the State of NJ authorizes. The state is holding the money so it would have nothing to do with a Funeral Home going bankrupt.
I have the Trust Agreement telling how this all works. So what you may want to do is contact the Company that holds the trust.
visit the funeral home in person and get that paperwork.
You join the line of a huge number of creditors who are owed money.
It is very unlikely that you will receive this money back, as there is now no money to give you.
I am very sorry but you do bring up an excellent point to those choosing to prepay funeral costs.
Just as an aside, I have found that prepayment and preplanning of funerals is one of the best things one can do for survivors. My mother prepaid and planned her own funeral. When she passed, all I had to do was to make sure her wishes were followed (yes, some family members tried to make some changes but that was not happening).
The primary difference is that with a Ch. 11, creditors are identified, remaining assets identified, a Trustee is appointed, and attempts are made to identify lower, partial payments to the creditors. The business continues, albeit as a less wealthy business than before the Ch. 11. As an individual, I'm not sure where you would stand.
I'm less familiar with the interests created by filing of a UCC-1, a statement executed by the debtor and filed on execution of various events of indebtedness (mortgaging the equipment, etc.) which identifies the chattel subject to it, and the secured interest of the lender. It's been too long since I've worked with USS statements to opine on how that secured interest would factor into the assessments made by the Trustee.
A Ch. 7 is a direct dissolution. in the sense of resolving and disposing of all the assets and concluding the business as a viable entity. This is a good, brief explanation of the differences between a Ch. 11 and a Ch. 7.
https://www.diffen.com/difference/Chapter_11_Bankruptcy_vs_Chapter_7_Bankruptcy
I don't know though, w/o researching all the qualifications for each, and which might prevail.
So as to your concern that the amount of the debt could force the company from a Ch. 11 to a Ch. 7 might be a valid issue. I've never worked on a Ch. 7, only Ch. 11s. A Ch. 11 can segue into a Ch. 7 if there are no funds to even allocate among the debtors.
And given that this was decades ago, I'm not sure how either is handled today. I do recall though that there was a mandatory period in which debtors had to file in order to be considered as claimants. This is a good reason to find a bankruptcy attorney ASAP.
The absolute best thing you can do right now is to aggregate all the supporting data you have for the debt, and contact a law firm which handles Ch. 11s on behalf of debtors.
I believe you are correct that there's no way to remove the funds; once the Ch. 11 or 7 is filed and a Trustee appointed, all funds are subject to his or her control, through the court.
I'm assuming that the Ch. 11 was filed in a Philly federal district court?
Good luck; this must be very frustrating, so I hope you're able to quickly find a bankruptcy attorney to help you.
(If you want suggestions on finding a good bankruptcy attorney, just post again to that effect.)
https://www.legis.state.pa.us/cfdocs/legis/LI/consCheck.cfm?txtType=HTM&ttl=13
The statute is extensive; I didn't try to read it.
This is a better, more concise definition of a UCC filing, and the priorities it creates:
https://www.investopedia.com/terms/u/ucc-1-statement.asp
This summarizes the jist of a UCC:
"A UCC-Uniform Commercial Code-1 statement is a legal notice filed by creditors in an effort to publicly declare their right to seize assets of debtors who default on loans."
If I remember correctly, this is a "priority" of liens.
PS: you might ask the bankruptcy attorney you hire about the apparent failure to invest the funds in a trust, as well as the concerns about the company's business practices. I don't know if there would be criminal charges involved, but it's worth the effort. If you were financially sabotaged, there may be others. I don't know if there's anything to recover though, although it's not unheard of for "preferential transfers" to be made prior to bankruptcy. If I recall correctly, that's a federal crime.
A firm of insolvency accountants or lawyers has to be in charge of winding this up, and the state authorities may already be investigating as well. Your best bet is to find out who already is in charge of this and has the answers you need. You will find it difficult or impossible to unravel it yourselves.
In the meantime, there is a thread running about what is actually needed for funerals. A funeral is a church service, and it doesn’t need to be held with an embalmed body in a pricey casket in the church aisle -or even in the church itself. Ashes can come straight from the crematorium and be scattered somewhere meaningful. Family can come to dinner in a restaurant and pay for their own meals. In case you can’t get the money back, think again about an affordable option.
I've also been told of someone who lived and died in California. The funeral was held at sea; friends paddled out on their surfboards and reminisced about their now deceased friend.
Religion played no part in either ceremony. Nor did it enter into my father's when I had a brief graveside ceremony.