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As personal bankruptcy impacts your life insurance policy
By Dawn Reiss, Life Quotes, Inc.
Filing for bankruptcy is usually the person's worst nightmare, but when it comes to protecting their assets (including the value of your insurance policy life), information is essential.
The life insurance policy is considered valuable property, which means that creditors may try to "Buy a stake in policy values," but all states and the federal government has "enacted legislation that provides protection for life insurance against its creditors, "said Glenn E. Stevick Jr., professor of American college.
Here are some basics you should know when it comes to bankruptcy and how it affects your life insurance.
First, people over the failure of what you think. With the latest economic crisis and mounting bills, the rate of bankruptcy filing today is in a high level of five years, according to recent figures released by automatic access to Court Electronic Records (AACER). What's more, the American Journal of Medicine reported that more than 1.5 million people filed bankruptcy last year, 60 percent of records were the direct result medical bills.
The American Journal of Medicine, for example, found that 1 in every 25 people in the Bay Area has filed for bankruptcy last year, says lawyer Bankruptcy, Jeena Cho San Francisco-based JC Law Group.
"It's like the dirty little secret," says Cho. "Two things we do not speak are death and money. When people start talking about their financial problems, they find that many people in the same Boat. "
There are two types of bankruptcy for individuals: Chapter 7 and Chapter 13.
Chapter 13 is where you can keep your assets and not risk losing the property, but you must pay part of the debt over a period of three to five years. If your cash value for life insurance worth more than the exemption in your state, then consider filing Chapter 13 to protect your assets, Cho recommends.
If you pass a means test and can present a chapter 7, which should settle their possessions and goods, which typically takes four months. It also means that your life insurance may be affected.
Cho said that one of the worst things anyone can make is to liquidate its assets and borrow money to start your life insurance and pension funds, which are almost always protected in case of bankruptcy.
"People are starting to take what little money they have to see if they could get out of debt re-pay it," says Cho. "I see people drain your retirement fund $ 40,000 to $ 100,000 in credit card debt. They begin to sell their cars and homes, without an exit strategy. The game plan is to maintain the maximum possible. "
Also, be sure to disclose everything, including the current cash value, need your whole life insurance policies. Some people do not "because they are afraid and end up losing by not disclosing its true value," says David Leibowitz, a bankruptcy lawyer Lakelaw of Chicago, Illinois
In the state and federal bankruptcy law, an individual presentation of bankruptcy may elect exemptions under federal or state law, but not both. Explains Stevick, 34 states as Illinois, New York, California and Florida "chose not to" federal law and has pushed its own protections state.
"Member Choice" Sixteen – including Texas – allow borrowers to choose between federal and state exemptions. Under federal exemptions, can protect up to $ 10,775 worth of a life insurance policy cash (double for couples). Moreover, in some states of the unused portion of the exemption homestead (movable and immovable) can be used for other goods, including the cash value of a life insurance policy. Some states require the policy to be in force for 1-2 years for protection under an exemption from the state, to avoid using life insurance as a shelter on the bankruptcy plan.
To be eligible to file bankruptcy under state protection, which should be considered a resident and live in a state for 24 months.
In Illinois, the life insurance is exempt from creditors as it is necessary to support an interpretation of dependents (spouse and dependent children), but the law is up to the bankruptcy judge.
When you file your bankruptcy petition you normally includes a timetable or a list of its property exempt, which may include your life insurance.
Ron Caruthers, a financial planner, which helps people pay for college over life insurance policies financed, says Florida, the state is more debtor-friendly file bankruptcy, since it has a homestead exemption strong. Another debtor-friendly state is Texas, which allows large exemptions for livestock and farms.
"That is why OJ Simpson took all his possessions and moved to Florida and put them on life insurance and home, since they could not touch or when he asked bankruptcy, "says Caruthers.
At the other end of the spectrum is Arizona. Caruthers says Arizona is the most creditor-friendly state.
Has in mind that all 50 states are different when it comes to bankruptcy protection, so it is best to contact a financial planner or bankruptcy attorney that state to learn more.
Here are some suggestions for what to look out for before you file for bankruptcy.
Benefits death: How much revenue in the death benefit is protected from creditors (some state has a dollar amount like $ 5,000 or $ 10,000 from other states that the integer value).
It is important to review how much of his life insurance policy is protected. For example, in California, an unmatured policy is to exempt $ 11,475 for homeowners submitted jointly or separately under code 704 (c), the non-home owners file under 703.140 (b), which allows up to $ 11,800. Tell your life insurance policy exceeds 11,475 dollars you can use the wild card exemption to $ 23,250, which can be applied in part or in whole to the policy as well.
Look statistics exemption when you do business because Each state is different. – Pay close attention to the differences state and federal laws and that the parties are protected policy owner, beneficiary, etc.
href = "http://www.lifequotes.com/articles/how-personal-bankruptcy-impacts-your-life-insurance-policy/"> This article was originally published in Life Quotes, Inc.
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