QUESTION
My brother-in-law and sister-in-law (married) filed joint personal bankrupty and bankruptcy on his business in the State of Pennsylvania.
Asked on Jun 11th, 2012 on Bankruptcy - Pennsylvania
More details to this question:
After making payments for 1 1/2 years to the bankruptcy court, they withdrew both of their bankrupcty petitions. Their plan was to make settlements with each debtor after my brother-in-law recieved his lump sum back money from Social Security Disability. Just before the Social Security Administration rendered a final decision, my brother-in-law suddenly died. His father had a $100,000 life insurance policy on my brother-in-law, with my father-in-law as the sole beneficiary. His widow was going to refile the bankruptcy, but my father-in-law was afraid to because he thought that the bankruptcy court might take the $100,000. (the total debt was more than $100,000). So instead, they made settlements on all of the debts with the life insurance proceeds, which resulted in my brother-in-laws 3 children receiving none of the $100,000 (which was the purpose of the policy). Was my father-in-law correct that the Bankruptcy Court would have gone after the $100,000 life insurance money?
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Yes, your father law was correct that bankruptcy court under chapter 7 would've gone all after the hundred thousand dollars and even in a chapter 13 considering you had almost the amount to pay off the debts they would've required you to use that disposable income so he is correct that bankruptcy court would've took the money. Although I don't understand how the money could be for three children when the beneficiary was not the children or the mother of the children or a trust fund for the children. If the children would have been made the beneficiary then the bankruptcy court would not have been able to touch the money and you simply could've converted to a chapter 7 and had all the debts discharged.
I have responded to your inquiry according to the laws of Massachusetts, where I practice. Laws can vary significantly from state to state and cases tend to be rather fact-specific, so you are best served by consulting with a knowledgeable attorney in weighing your options.
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Joseph F. Botelho, Esq.
BOTELHO & ASSOCIATES, LLCAttorneys At Law www.massachusettslawyeronline.com
126 Shove Street Unit 202 Fall River, MA 02724
Office: 888-269-0688Cell: 508-801-6747FAX: 877-475-8147
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Answered on Jun 15th, 2012 at 2:45 PM