Life Insurance and Bankruptcy

These are economically difficult times: one in ten Americans is unemployed, and many more are burdened with debt. In times like these, many people invest in life insurance to ensure their families are financially secure in the event of their passing. If you are one of the millions trying to get by, filing for bankruptcy could offer you an easier way to eliminate your debt. Yet many people in your position wonder if assets like life insurance are protected during bankruptcy.

Bankruptcy is a way to pay off your debts, and paying off debt can mean giving up some of your money and property. You may need to sell certain things, even a vehicle, to help pay off your debts. Fortunately, however, bankruptcy laws both at the Federal and within Massachusetts protect much of your property from creditors. Group life insurance policies are always protected, as generally are ones where the spouse is a beneficiary.

Life insurance policies are also exempt if the insurance agreement states that it is secure from creditors. Proceeds from policies can also be exempt if the agreement says so. There are types of life insurance that are intended to function as part of an investment portfolio, essentially like buying into a mutual fund or investing a 401(k). These policies may be less “insurance-like” than policies that sit around before being paid to your family, but they are often at least partially exempt from creditors as well.

Contact Us

Bankruptcy is a very complex undertaking. Even if your life insurance is safe from creditors, it's easy to overlook legal details that could end up costing you time, money, and frustration. The lawyers of Joshua Spirn & Associates can work with you to create a plan that helps you find debt relief without putting your livelihood at risk. To discuss your case with an experienced Boston bankruptcy lawyer, contact them today at 800-975-5346.