QUESTION
What happens if I surrender a whole life policy and does the money go to the court?
Asked on Jul 31st, 2013 on Bankruptcy - Michigan
7 ANSWERS
Bankruptcy Attorney serving Livonia, MI
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Charles J. Schneider, P.C.
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Why would you do that? Have you not exempted it?
Answered on Aug 06th, 2013 at 10:16 PM
3 Awards
If you have a lawyer, please discuss this issue with your lawyer. You were required to disclose the cash surrender value of the policy on your schedules. If you properly disclosed the asset, it was included in the process of determining your chapter 13 plan payment. The chapter 13 trustee could not compel you to liquidate the policy. Continuing the payments for the policy could be problematic if you are paying creditors less than 100%. If you did not disclose the policy, that must be remedied immediately. Your best bet is to obtain legal advice from an experienced lawyer than can review all of the circumstances and give you proper guidance.
Answered on Aug 06th, 2013 at 10:16 PM
Richard hirsh
I would not surrender the policy until after the case is filed and you have claimed your exemption. Then you can surrender and keep the funds provided no one makes a timely objection to the claimed objection. If you surrender before you file the money loses its exempt status and it might be taken by the case trustee in a chapter 7.
Answered on Aug 06th, 2013 at 10:16 PM
No, if you cash out the policy that money is yours.
Answered on Aug 06th, 2013 at 10:16 PM
Litigation Attorney serving Stockton, CA
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Patrick Jay Edaburn
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It depends on how much you get and what it is for. If it is a modest amount to be used for food/etc then probably not. If it is a large amount for non necessary expenses they might. Check with your attorney to be sure
Answered on Aug 06th, 2013 at 10:16 PM
If you surrender a whole life insurance policy, it goes to the bankruptcy trustee who uses the money to pay a portion of your debts. Of course, if you are eligible to use the Nevada exemptions, you would be crazy to let this happen because it is a simple matter to claim all of this money as exempt. But you have to know what you are doing to make this happen.
Answered on Aug 06th, 2013 at 10:16 PM
Bankruptcy Attorney serving Walnut Creek, CA
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Alan E. Ramos Law Offices
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It is unusual for someone to have to surrender an asset in Chapter 13. Generally, in Chapter 13 you must pay the value of your non-exempt assets in your plan (for example: if your non-exempt total $30,000.00 in value, your plan must pay creditors at least that much). In some cases, the only way a debtor can pay that value to creditors is to liquidate an asset and use the proceeds to pay down the obligation to creditors. You should contact your attorney, or an attorney if you don't have one, to review the situation in your case.
Answered on Aug 06th, 2013 at 10:16 PM