Filing for bankruptcy due to the mental illness of a debtor is a complex process involving two separate courts. The probate and bankruptcy courts play roles in regard to a mentally ill individual who is in need of bankruptcy protection. Both courts have ongoing jurisdiction over a mentally ill debtor's finances --including her assets and debts.
File a petition in probate court to establish a conservatorship for the debtor. At the heart of a bankruptcy based on mental illness is a demonstration that the debtor is both unable to take care of his finances and that his debt outweighs assets and bankruptcy relief is required. A debtor in such a situation as the result of mental illness is not able to tend to his financial affairs and needs a guardian and conservator appointed to deal with this issues on his behalf.
Obtain from the probate court an order establishing a guardianship and conservatorship for the debtor. In addition, the probate court issues what are known as letters of guardianship and conservatorship. A copy of the letters of guardianship and conservatorship is filed with the bankruptcy petition.
Prepare a petition for bankruptcy. Rather than the debtor signing the petition once completed, the guardian and conservator signs the document. The guardian and conservator normally are the same person although legally two individuals can serve in these capacities.
File the petition for bankruptcy with the clerk of the bankruptcy court.
Develop a repayment plan if a Chapter 13 bankruptcy case is filed.
File a motion with the probate court to approve the Chapter 13 plan developed in bankruptcy court. Once approved by the probate court, the bankruptcy court implements the Chapter 13 plan.
Prepare and file a motion with the probate court to approve the proposed discharge if a Chapter 7 bankruptcy is filed. (In a Chapter 7 bankruptcy, the debtor's obligations to creditors are liquidated.)