Can creditors take a person’sprinicipal and only residence, to pay a hospital bill?

UPDATED: Sep 1, 2011

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Can creditors take a person’sprinicipal and only residence, to pay a hospital bill?

The person is 81 years old and on medicare, but has no gap insurance. The kids are worried that her home could be taken to pay the hospital. Is it protected from creditors as a principal residence? It is paid off.

Asked on September 1, 2011 under Bankruptcy Law, Michigan


FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

In all states in this country there are these laws created under the "homestead act" which purpose is to exempt from creditors a certain amount of equity in the home usually up to the first $100,000.

From what you have written, it sounds as though the eighty-one (81) year old person on medicare needs some estate planning assistance to protect his or her assets from creditors and to pass such to whomever desired.

One such means would be to have the home appraised and have the person you are talking about gift a fractionalized interest each year wo whom he or she wants up to the allowable amount under Internal Revenue Service regulations while reserving a life estate in the home.


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