Is the life insurance policy for my Grandma safe?

[dailydriver]

Hi,

I'd never thought I'd be here searching and reading about this.

But one questions has been on my mind while I'm thinking/stressing over this bankruptcy situation.

I'm going to file it, but had a question on a life insurance policy that was given to me to take over.

It was my dad's policy for my grandma. He passed away and I became the owner of it. Now that me and the wife is going to file bankruptcy. I'm afraid to lose it.

What will happen to it?
Will the make me cash it out and take all the money?

The policy has a cash value of $19,000. Almost 90 percent of it was paid by my dad and I took it over about 5 years ago to keep it going. My grandma is still here with us.

I'm very concerned about it.

Thanks for helping ahead of time.

[IHateToBeEmo]

yes, if you have an asset worth $19,000 and you file Chapter 7 bankruptcy, the trustee will try to take it for the benefit of your creditors.
dailydriver, get a free consultation from a bankruptcy attorney and bring the policy with you. you should get a precise answer then.

[dailydriver]

I talked to one and he stated that we could just keep quite about it. I'm the owner so they'll probably see it.

[ValleYum]

Are you guys trying to protect home equity or are you underwater?

If you use the Federal bankruptcy exemptions, there is a $10k plus wildcard available if you aren't using it to protect home equity. (The $10k is doubled if you're married and both file).

There is language in the Federal exemptions that will allow you to exempt the policy itself, but not the cash value - you could use that and then use the wildcard to protect the cash value.

There is also language about protecting about $11k in cash value on a life insurance policy but the policy must be for the debtor or for someone upon whom the debtor is dependent - so, sadly, that one won't work.

What that first lawyer said sounds shady to me. Don't try to hide (keep quiet about) *anything* from a Bk trustee. Ask attorneys in your free visit with them about using the Federal exemptions and how that could help you. Good luck.

[df04527]

Run don't walk from an attorney that recommends keeping quiet about it. Yikes! Good for you to question it!