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  1. #1
    2worried Guest

    Unhappy will I lose my life insurance?

    I live in VA and my husband and I are planning to file for bankruptcy. I have a very small life insurance policy ($10,000) just so there will be enough to cover only my funeral expenses when I die. The amount I would recieve to cash it in is only about $400-$500. When we file for bankruptcy however, will I lose policy! It's the only one I have and obviously if we're filing for bankruptcy there would be no money to pay for my funeral expenses right now either if I died. I really want to keep this policy! If the court would take it, then I might as well cash it before we file so I have the money myself for our bills right now.
    Will I be able to keep this policy?
  2. #2
    racer72 is offline Senior Member
    Join Date
    Jan 2001
    Posts
    14,133
    You life insurance is exempt in bankruptcy. You will not have to cash in your policy.
  3. #3
    2worried Guest

    Smile

    Thank you for the response. When we had our consultation with the lawyer, he didn't really respond to the question in a confident matter and just blew it off. It had me concerned since things have become very tight. We already pawned everything we could just to pay our mortgage and some of our home bills. The last thing I wanted to do was to lose the policy too. Thank you!
  4. #4
    bigun is offline Senior Member
    Join Date
    May 2001
    Posts
    7,147
    I'd suggest another talk with the lawyer. Some states don't exempt the cash value from whole life policies so it is possible you could lose that should your state be included in that group. But, they won't make you cancel the policy.
  5. #5
    2worried Guest

    Question

    How can you keep I keep the policy if I lose the cash value? I'm sorry but I don't understand how that is possible? If I cash in my policy then it no longer exists. So how can they take the cash value but I keep the policy?
  6. #6
    bigun is offline Senior Member
    Join Date
    May 2001
    Posts
    7,147
    First of all, check with your lawyer to see what the law is in your state.
    But, your cash value is available to you as a loan. Say, you take out the $500 and die the next week. Your policy will pay your beneficary $9500. Same thing if it must be surrendered to a bk trustee. You die and the policy pays face amount less the cash value withdrawn.
    Again, nail the lawyer don on that because, in my state IRA's are absolutely exempt from creditor seizure so, people with cash value in a whole life policy cash out the c.v and put it into an IRA prior to bk. By way of disclaimer, my state supposedly has the most liberal rules regarding IRA's in bk in the country so, your mileage may vary on this one.

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