Your Detroit Bankruptcy Lawyer is always asked if a whole life insurance policy can protect you in the event of bankruptcy. A whole life insurance policy is a life insurance policy that has a cash value. It is generally more expensive than a normal term life insurance policy, but many people use a whole life insurance policy as a retirement tool.
As with any item of personal property and bankruptcy, whether the whole life insurance policy can be protected depends on each individual’s situation and the amount of personal property they own and its value.
If you file a Chapter 13, you will most likely be able to protect the full value of the whole life insurance value. This is because in a Chapter 13, you are paying off your creditors so that you can keep all of your assets, even those that exceed the exemption amount.
However, if you are in a Chapter 7, the question of whether or not you can keep them depends on many things. First, are you using the federal exemptions or the Michigan exemptions? You must choose a set and you cannot mix and match. Also, how much are your assets worth? House, car, bank accounts, stocks, bonds, personal items, etc. everyone comes into play here to decide which set to use. Be sure to speak with a lawyer to find out which set would be beneficial for you before applying. If not, you risk losing your assets.
The federal exemption, under 11 USC 522(d)(8) (which is adjusted every three years) allows for an exemption of $11,525.00 of cash value. So if your cash value is only $10,000.00, then you can exempt your whole life insurance policy. Then your creditors or the Trustee cannot take them. You can also deduct the amount of the loan you have against the cash value when determining the amount of the exemption. So if you have a cash value of $25,000.00, but you have a loan of $15,000.oo against it, then you only need to exempt $10,000.00. You’re sure.
Michigan’s exemption is much more generous. Under Michigan exemptions, you can exempt the full amount of cash value. Sounds great? Well, remember you have to choose the federal waivers or the state waivers, you can’t pick and choose. While the Michigan Waivers have some larger allowances than the federal ones, the federal ones have some larger allowances than the state ones.
It is important to speak with your Detroit Bankruptcy Lawyer and discuss all of your assets and values. Only then can I provide an analysis on which set would be beneficial to you and to protecting what you own. You don’t want to try this on your own, because only an experienced bankruptcy attorney can protect what you worked so hard to obtain.
If you have a whole life insurance policy and need to get out of debt, call us today at(586) 439-4297, Extension 0and schedule your free consultation. We will look at your situation and decide if the federal or state waivers would be best for you.
