Bankruptcy Life Insurance question

[jonindebt]

Ok I have a little question about life insurance and it's relationship to bankruptcy. I have a $150k policy in my name and I'm thinking of filing bankruptcy with my wife, we both owe about total $70k in credit cards. I have 3 sons one 18 and I claimed him as a dependent and a part of my household. The others are 23, 27 yrs and both of them are not part of my household. So couldn't I designate my older 2 sons as the beneficiary, so that way I can protect my life insurance payout? (I have diabetes and had parts of my colon removed for colon cancer b4). Am I right or am I wrong?

[lrprn]

Since you and your wife aren't the beneficiaries of your insurance proceeds, bankruptcy doesn't impact the payout to your adult sons. Only if one of you receives a life insurance payout during or within six months of your discharge would the cash be turned over to your trustee to disperse to your creditors.

Your wife may have to sign a form stating that she is aware you are not listing her as a primary beneficiary. I assume she won't have a problem with that.

We aren't lawyers here, so to be certain your idea is workable in your state, make a few free or low-cost initial consultations with experienced bankruptcy lawyers in your area. You'll be able to ask this question plus find out if bankruptcy is going to be a good long-term decision for your family.

Good luck - hope everything works out in your favor! Come back anytime if you have more questions we can help with about filing bankruptcy.

[CindyLou]

Lrprn,
What if the policy has cash value?

[jonindebt]

It's a straight 10 year term life insurance, so no worries about cash value. I'm gonna see an attorney over this issue next week. But based on what you said I could have my youngest son as a beneficiary too?, if that is so then awesome. I kinda feel iffy about leaving my older 2 sons as the beneficiary, even though they said they will pay the fair share of my youngest son to him. You never know when people see money in their face. I was under the impression that if I leave anything to my youngest son, BK process would see that money as part of the estate since he is part of the household and a dependent.

[millerc507]

If you are the policy owner, you can make any changes you want. Only if your wife owns the policy would she need to sign anything. Speak with your agent . . . you should be able to designate somehow "for care and benefit of . . ." I used to work in underwriting but I can't remember the specifics. You can also call the policyholder service number and they can help you. A good agent can help with the whole "estate planning" side of it. Good luck with your health!

[millerc507]

Also, I forgot to add, you can make anyone a beneficiary, regardless of age and you can designate the percentages.

[jonindebt]

Well, Miller I didn't think my agent would know about it, but since you suggested I'll try that route. Thanks guys for all your answers, if there's anything anyone knows about this subject or any other way to alleviate my situation please post a comment.