Submitted by Rachel R on Fri, 10/14/2016 - 10:33am
Will you lose the insurance that protects your family?
Image Source: Flickr User Seth Capitulo
Many consumers have life insurance to protect their family in case of their death, but it’s important to know how this will be treated in bankruptcy and whether it’s an asset that can be taken to benefit your creditor. Will your life insurance policy survive your bankruptcy? It depends on the type of policy and its value. Here’s what you need to know.
What Type of Life Insurance Policy do You have?
There are three primary types of life insurance commonly sold these days—term life, whole life, and universal life insurance. Some life insurance policies have a cash value that can be redeemed while you’re still alive—and that makes them an asset. Here is a quick rundown of the policy types.
What Type of Bankruptcy are You Filing?
With Chapter 13 bankruptcy, more assets can be protected than with a Chapter 7, and that means your life insurance policy of whatever type should be safe. However, the cost of premiums might impact your disposable income and expense considerations.
With Chapter 7 bankruptcy, what’s important is the available cash surrender value of a universal or whole life policy. It’s also important to know whether you have minor children the policy is designed to protect and whether you have available exemptions to cover the amount.
North Carolina bankruptcy provides exemptions to protect a certain amount of assets during your bankruptcy filing. For instance, home equity up to $35k can be protected for an individual bankruptcy filer and up to $70k for a couple filing joint bankruptcy.
There is also a wildcard exemption of $5k that could be used to shield your life insurance policy. This is a complex area of bankruptcy law, but you don't have to figure it out on your own. We recommend consulting a reputable and experienced North Carolina bankruptcy attorney for assistance.
Is Bankruptcy Best for Your Debt Circumstance?
In addition to life insurance considerations, there are other complicated areas of debt and finance when it comes to bankruptcy. This is why consulting an attorney with years (preferably more than a decade) of experience in North Carolina bankruptcy law is a smart strategy.
You can certainly file bankruptcy without an attorney, but you might not get the most debt relief possible if you go it alone. One important thing to know is not to cancel or sign over your life insurance policy prior to filing bankruptcy. Trying to hide assets from the court is never a good idea.This can land you in hot water with the court and get your bankruptcy tossed out—or result in fraud accusations. Neither is a good thing.
To find out more about the debt relief available using North Carolina bankruptcy, contact the Law Offices of John T. Orcutt today.
Call +1-919-646-2654 now for a free North Carolina bankruptcy consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington. There’s no risk and no obligation – get the information you need about debt relief.
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