We purchased Mom's house through her bankruptcy. Are we subject to Medicaid recovery?

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Geeves - if house was still owned by mom, to me, it could make a difference on her medicaid application. The OP - methomason - wrote that his wife bought the house from his mom "before it was sold on courthouse steps". It reads like the foreclosure was not finalized, so not bank-owned and there was not an open to all sale. Yes, the $ went to the bank but just how & for what amount could matter.

So say, mortgage balance was 300k & house assessed at 400k & bank agreed to 100k; then between 200k - 300k gained value by wife in a real-estate version of "insider trading" if property still technically owned by mom. Neither you in NC or me in LA could put our $ in play to buy a 400k house for 100k. I'd be worried that Medicaid will tie up the moms application eons to get beyond this and any NH facility will run out of nice in having her stay "Medicaid Pending" beyond a few short months.

Foreclosures are sticky and if - depending on your state - the mortgagee can do a right of redemption, it can be super sticky. If the "sale" was done by equitable RoR, the owner could broker the sale to a purchaser under VERY unusually favorable terms. If the son -as DPOA - sold his moms house to his wife, well its just totally hinky. The bank if there's a ton of foreclosures just wants the paper moved.... 1 less house to clutter their books.... bank doesn't care. But Medicaid might.....

If it was a short sale, that would likely produce a 1099-C (fully taxable income) which would mean mom may need to file taxes (1040 & 982) or deal with whatever Mortgage Relief Act filing paperwork to get her income zero'ed out so IRS doesn't attach her SS income. For those on NH Medicaid, doing anything that places their monthly income in jeopardy - like IRS attaches it for unpaid taxes- is a serious problem as they have to have that SS income to pay the required by medicaid copay or SOC (share of cost).

Walking on debt has consequences. For those dealing with Medicaid, it can mean extra paperwork. IMO they need to need to have a handle on everything done by mom BEFORE she ever applies for Medicaid. If that means having to hire a elder law atty & real estate atty to shepherd his moms medicaid application, then so be it.
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Yes the money goes to the bank to pay the mortgage. It's very important how the papers read. If it was a "short sale" then you actually bought it from mom. Read the papers to see WHO the seller was.
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Is your mother on Medicaid now? Is she expecting to apply for it soon?
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Talk to an attorney. However, since the house was already foreclosed on, it doesn't matter who purchased it. You said the money went to the bank. You just happened to be related to the previous owner.
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I'd be somewhat MORE concerned about mom's Medicaid eligibility first & foremost rather than worrying about possibly you & your wife dealing with estate recovery.

The house was it foreclosed on and become bank owned (a REO) so your wife bought it from bank??
OR
Was it owned by parents and your wife bought it from them?? So sale was a right of redemption? or maybe a short sale?
How was sale recorded?

I'd imagine that determining just who owned the house at time of sale is going to be central as to whether or not Medicaid will consider the sale to be a issue for mom's application. And perhaps Medicaid concerns if the sale was "at arms length" and if not a transfer penalty inquiry. Medicaid doesn't care about their debts or bankruptcy but their about income & assets. I'd bet that mom's application gets flagged for deeper review….. Did your wife paid less than full debt and significantly less than assessor value on the house?

Property sales recorded to the penny & available for Medicaid to review.

Really this is sticky. I'd suggest you speak with a real estate atty to review the sale if you are unclear on what the foreclosure status was on the property at time of sale & before your mom applies for Medicaid. And ask the RE atty for a referral to an elder law atty as you may find mom will need one to shepherd her Medicaid application.
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Very good article. I had read it before. Not a word about bankruptcy in the article. My mother and father were going through Bankruptcy before his death and the bankruptcy was finalized and in the process my wife an purchased the house before it went to be sold at the court house steps. The money went to the bank not to her. My question is can Medicaid go after this house to recover her nursing home expenses should she ever become a resident before her death.
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