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[av_heading heading=’Is Life Insurance Protected in Bankruptcy?’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’note’ font=’svg_entypo-fontello’ size=” av-desktop-font-size-title=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-desktop-font-size=” av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-desktop-font-size-1=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” subheading_color=” seperator_color=” icon_color=” margin=” margin_sync=’true’ av-desktop-margin=” av-desktop-margin_sync=’true’ av-medium-margin=” av-medium-margin_sync=’true’ av-small-margin=” av-small-margin_sync=’true’ av-mini-margin=” av-mini-margin_sync=’true’ headline_padding=” headline_padding_sync=’true’ av-desktop-headline_padding=” av-desktop-headline_padding_sync=’true’ av-medium-headline_padding=” av-medium-headline_padding_sync=’true’ av-small-headline_padding=” av-small-headline_padding_sync=’true’ av-mini-headline_padding=” av-mini-headline_padding_sync=’true’ padding=’10’ av-desktop-padding=” av-medium-padding=” av-small-padding=” av-mini-padding=” icon_padding=’10’ av-desktop-icon_padding=” av-medium-icon_padding=” av-small-icon_padding=” av-mini-icon_padding=” link=” link_dynamic=” link_target=” title_attr=” id=” custom_class=” template_class=” av_uid=’av-men02e1t’ sc_version=’1.0′ admin_preview_bg=”][\/av_heading]<\/p>\n
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\n<p>https:\/\/www.youtube.com\/watch?v=NCSHqvwIF78There are two primary types of life insurance: term life and whole life.\u00a0 There are many ways these can be structured, e.g. as a universal policy, but for our purposes we will look at the simplified term life insurance and whole life insurance policies.A <strong>term life insurance<\/strong> policy does not mature until someone\u2019s death.\u00a0 As a result, when you file bankruptcy your term life insurance policy, or a policy that you are the beneficiary of, does not have any value until someone\u2019s death.\u00a0 If there is no value there is nothing to protect in your <a title=”NC Bankruptcy Law Firm” href=”https:\/\/www.duncanlawonline.com\/bankruptcy\/” data-mce-href=”https:\/\/www.duncanlawonline.com\/bankruptcy\/”>bankruptcy<\/a>.\u00a0 However, if you are paying premiums for a term life policy, the monthly premium should be listed in your budget.<img class=”alignleft wp-image-4363 size-medium” style=”border-style: initial; border-color: initial;” title=”Picture of Senior Couple” src=”https:\/\/www.duncanlawonline.com\/wp-content\/uploads\/2011\/04\/Happy-Older-Couple-300×199.jpg” alt=”Picture of Senior Couple” width=”300″ height=”199″ data-mce-src=”https:\/\/www.duncanlawonline.com\/wp-content\/uploads\/2011\/04\/Happy-Older-Couple-300×199.jpg” data-mce-style=”border-style: initial; border-color: initial;” \/>A <strong>whole life insurance<\/strong> policy has a \u201ccash surrender value\u201d.\u00a0\u00a0 This means after having the policy for a period of time, you can borrow against the proceeds.\u00a0 Those proceeds could then be used to pay your debts.\u00a0 Fortunately, as long as the whole life policy has your spouse and\/or children as the beneficiaries and you are using North Carolina exemptions, it is protected under the <a title=”North Carolina State Constitution” href=”http:\/\/www.ncga.state.nc.us\/legislation\/constitution\/ncconstitution.html” data-mce-href=”http:\/\/www.ncga.state.nc.us\/legislation\/constitution\/ncconstitution.html”>North Carolina Constitution<\/a> and the <a title=”North Carolina General Statutes” href=”http:\/\/www.ncga.state.nc.us\/gascripts\/statutes\/statutes.asp” data-mce-href=”http:\/\/www.ncga.state.nc.us\/gascripts\/statutes\/statutes.asp”>North Carolina General Statutes<\/a>.\u00a0 The North Carolina Constitution states that life insurance proceeds where the spouse and\/or children are the beneficiary are protected from the claims of creditors. \u00a0As a result, you should be able to fully protect your while life insurance policy when you file bankruptcy.If you are the beneficiary of a term life policy or a whole life policy and the person dies while you are in bankruptcy, those proceeds belong to your estate or the court.\u00a0 As an example, if your great uncle Billy dies and leaves you $100,000, the $100,000 life insurance proceeds would be payable to the bankruptcy trustee to pay your debts.\u00a0 If the life insurance proceeds pay all your debts in full, any remaining life insurance proceeds would be paid to you.\u00a0 Life insurance proceeds that you become entitled to within 180 days of the date the bankruptcy is filed with the court is also property of the estate.\u00a0 As a result, if uncle Billy dies two months after your bankruptcy is completed, but it is within the 180 days of the date you filed bankruptcy, those proceeds would become the property of the estate as well.\u00a0 Therefore, you should tell your bankruptcy attorney if you believe you may receive any life insurance proceeds during the six months after you file.\u00a0 As always, you should seek the advice of your bankruptcy attorney.<\/p>
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