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Are insurance death benefits protected in bankruptcy?

On Behalf of | Nov 4, 2016 | Asset Forfeiture, Firm News

What’s a windfall? The first definition you find in the dictionary refers to fruit that has been “blown down from a tree or bush by the wind.” Most readers in Arkansas, though, would associate with the second definition, which is “a piece of unexpected good fortune,” typically one involving a good deal of money.

Those don’t come along very often. Perhaps the best example might be if you get a lottery or raffle ticket as a gift and, lo and behold, you win. Another might be if you happened are named heir to a fortune or receive benefits of a life insurance policy after the death of an unknown relative. Would such largesse be something protected against asset forfeiture  in the event you file for bankruptcy?

The answer to that question can depend on what state you live in. Laws in each state tend to vary somewhat and so the only way to be confident is to consult with an attorney who is experienced in the laws as they apply to your particular case.

That said there are points of note that readers might find encouraging. For example, in general, any assets acquired after filing for Chapter 7 bankruptcy are not counted as part of the estate subject to liquidation to pay off debts. There can be some exceptions, though.

Inheritances, death insurance benefits, or property obtained through a divorce, received within 180 days (approximately six months) of the bankruptcy filing would be subject to possible forfeiture. Such a windfall might also affect the amount paid to creditors in a plan set up under a Chapter 13 filing.

To get a reliable assessment of your situation and your debt relief options it’s wise to speak with a skilled lawyer.


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