Death then BK7

[azgrandpa]

What is the name of your state? Arizona

Sorry for the morbid tone of this question, but really am interested if anyone has experience with this type situation!
I have serious heart trouble so I could drop before I finish this post or I could live another 20 years, no way of knowing. So, as I understand it; if I die "my creditors" will then go after my spouse for payment of these debts. Can my spouse then file BK7 on those debts and get them discharged?
Also, I have life insurance, but only 20,000 is exempt; would all the creditors get to attach liens to the life insurance proceeds in the CH7 process?

[Ladynred]

Since you live in a community property state, and your spouse would be held liable for debts you incurred during your marriage, then YES, your spouse could file CH 7 bankrupty on those debts.

Once the BK is started, no creditor can attach any lien to ANYTHING. If all the debts are discharged, then they're flat outta luck and the funds would not be at risk - except from a BK Trustee looking for assets.

[azgrandpa]

Thank you LadyNRed for your quick reply. That's what I sort of thought would be the case! So, the trustee will take enough of the life insurance proceeds to pay off my creditors. Is that a safe assumption? If that's the case; looks like I'd better get busy and file while I'm still kick'n!!

Thanks again.

[Bigfoot]

Ask your life insurance agent while filling out the application, but I don't believe Trustees nor anyone else has access to your life insurance proceeds but the named beneficiary. And with a pre-existing condition like the heart ailment you state, coverage will be fairly expensive.

And, just for the record, any of us, can die at any time.

[bigun]

Yeah, me and Bigfoot are confused here:


Also, I have life insurance, but only 20,000 is exempt; would all the creditors get to attach liens to the life insurance proceeds in the CH7 process

Are you saying $20K of cash value is exempt? Not, 20Kworth of coverage.
Upon your death, the proceeds of a life insurance policy go to the beneficary and avoid probate. I'm not seing how a trustee could get control either.

[azgrandpa]

The following is quoted from the AZ exemption statutes:

"Life insurance proceeds to $20,000 if beneficiary is spouse or child (husband and wife may double)"

I take this to mean that only $20,000 of the coverage proceeds are exempt. Possibly $40,000 due to the "husband and wife may double" clause. But I don't quite understand that part.

So if I die, wife files BK7 to discharge all my debts, the trustee could take enough of the death benefit to pay all my debts! Except for the first $20,000 (or $40,000).

And if I file BK7 before I die, the trustee will also place a lien on any future benefits. So, if you have enough life insurance, at least in Arizona, your debts after death are going to get paid, whether I file before I die or after!

Has anyone had first hand experience with this situation? Is this the way it goes?

[azgrandpa]

Sorry...I need to correct the exemption quote in my previous post.

It is actually:

33-1126. Money benefits or proceeds; exception

A. The following property of a debtor shall be exempt from execution, attachment or sale on any process issued from any court:

1. All money received by or payable to a surviving spouse or child upon the life of a deceased spouse, parent or legal guardian, not exceeding twenty thousand dollars.

I had used a quote from another site which was not verbatim.