Priority of claims for refund if independent living center goes bust

[Paul84]

Jurisdiction

Connecticut

About four years ago, my family paid the entrance fee for my elderly mother and aunt to live in an independent living center. We paid 50% more than the standard entry fee, and in return for that premium payment, our contract "guarantees" that we will receive 75% of each apartment's entry fee upon the death of each relative.

We recently learned that the center's finances are not great. In the unlikely event that the center were to go bankrupt, would we have priority over other creditors?

 

[adjusterjack]

You'd probably be at the bottom of the list with other unsecured creditors. In a Chapter 7 bankruptcy unsecured debts get discharged. In a chapter 11 (reorganization for a business), secured creditors get the lion's share, unsecured creditors get pennies on the dollar, if anything at all.

 

[despritfreya]

Your question cannot be really answered as we do not have privy to the terms of the contract. For example, we do not know if the contract is a leas or a buy-in. We do not know how the title to the unit reads or whether or not there is any recording that makes your mom's and/or aunt's estate(s) a secured creditor (or 75% titled owner) now and/or upon their deaths. Further, there may be a question as to whether or not the contract is executory in nature and subject to rejection if a bk is filed. There is no simple answer.

Please note that should the ILF/ALF file bk the first thing that is most likely going to happen is that the US Trustee is going to get a State Healthcare Ombudsman appointed to keep tabs on the welfare of the residents.

Once you are notified of the bk you will need to gather all relevant ownership/contract documents and sit down with a well qualified attny - one who has some experience in dealing with such facilities filing bk. Until then just stay diligent in making sure your family members' needs are properly met.

Des.

 

[zddoodah]

Nothing in your post suggests you'd have anything other than an unsecured nonpriority claim in bankruptcy.