Bankruptcy and Life Insurance
[social_share]Debts have been booming nowadays as a result of irresponsible use of credit cards as well as loans to buy personal pleasures. These methods of payment have caused thousands of families and businesses to falter from a significant amounts of interest rates that have been accumulated from overdue debts to one or more creditors. In addition, debtors who’ve been pushed to their financial limitations end up filing a bankruptcy report, which is considered to be the worst thing that can happen for debtors.
Bankruptcy often permits the lawful obtainment of the debtor’s properties and assets as a payment to creditors. Along with these assets may include the life insurance policy that the debtor has. Life insurances are considered by court as an asset having cash value, however, one shouldn’t be worried as bankruptcy reports immunize particular types of assets and properties from creditors in order to allow the debtor a new beginning. Under federal laws, debtors may be allowed to protect up to $10,000 of cash value in their life insurance policy during a bankruptcy filing. In addition, married couples may be eligible for double value of all exemptions under the bankruptcy code created by the federal government.
Basically, life insurance policies and annuities are treated distinctly as compared with other assets and properties due to the nature of the proceeds and the cash amount is a cardinal to protecting the family. The benefits for dependents are also immune from creditors, such as disability, unemployment and health insurance benefits. However, debtors and creditors should realize that not all policies or federal laws carried out with regards to these types of cases may vary from state to state. And although almost all states have passed such laws that accord the federal policies yet may have significant differences. for example, some states may not lawfully exempt the debtor’s insurance policy and proceeds if he/she cashes in the policy prior the filing of the bankruptcy report. For example, the state of Nevada will immunize a life insurance policy or a proceed if the yearly premiums does not exceed $1,000. Nevada also allows protection of annuity compensations for up to $350 per month.
