Life insurance payment and bankruptcy.

[fireguyrick]

Good morning,

I have searched on this forum for a little while now, and I have not found info on my situation.

My mother passed away recently leaving my step-father and I 50/50 life insurance benefits. The amount would be $40K to each of us.

That being said, she (possibly both of them, I am not sure) declared bankruptcy about a year ago. I know it was not chapter 7, as she was having wages send automatically to debtors every month.

What will be the status of the life insurance funds? My family resides in Wisconsin. Do her creditors get a majority of the funds? Do they consider cost of the funeral prior to creditors? If they deduct funds, do they deduct from the total amount of insurance ($80K) and then whatever is left is split between my step-father and I, or would it come from his portion prior to mine?

I know I, or actually my step-father, should speak with an attorney, but it is hard to address this with him at the moment. I am interested in finding out what is likely to happen so I can plan for how to pay for the funeral expenses and cost of the headstone.

Thanks

Rick

[arkienurse]

Good morning,

I have searched on this forum for a little while now, and I have not found info on my situation.

My mother passed away recently leaving my step-father and I 50/50 life insurance benefits. The amount would be $40K to each of us.

That being said, she (possibly both of them, I am not sure) declared bankruptcy about a year ago. I know it was not chapter 7, as she was having wages send automatically to debtors every month.

What will be the status of the life insurance funds? My family resides in Wisconsin. Do her creditors get a majority of the funds? Do they consider cost of the funeral prior to creditors? If they deduct funds, do they deduct from the total amount of insurance ($80K) and then whatever is left is split between my step-father and I, or would it come from his portion prior to mine?

I know I, or actually my step-father, should speak with an attorney, but it is hard to address this with him at the moment. I am interested in finding out what is likely to happen so I can plan for how to pay for the funeral expenses and cost of the headstone.

Thanks

Rick

I am so sorry to hear about your mom. I know it is difficult to think of right now, but you really should sit down and have a talk, first with your stepdad, and then both of you need to contact the lawyer that handled the bk for your mom. I would contact them Tuesday morning, first thing.
I have no idea how this will be handled, but I don't think it is anything that needs to wait, even with the difficult time you are going through right now.

[JRScott]

Sorry to hear of the passing of your mother. My condolences.

I to think this is something you should approach her original bankruptcy lawyer with this information and ask about it. I'm not sure about the law in this matter. I know its a tough time and I wish you and yours the best.

Another question would be was the bankruptcy a joint or single filing?

[lrprn]

I am so sorry for your loss, Rick. How awful for you and your dad to have to deal with this right now .

...she (possibly both of them, I am not sure) declared bankruptcy about a year ago. I know it was not chapter 7, as she was having wages send automatically to debtors every month. What will be the status of the life insurance funds?

If your mom filed Ch 13 alone, then her case will be automatically closed out due to her death and your dad's inheritance is his to keep.

However, if they filed jointly (which is more typical in Ch 13), then their lawyer will have to file an amended case due to your mom's death. It may place your dad into Ch 7 - without more details about your dad's financial picture there's no way to predict.

No matter what, if your parents filed together, the trustee will take your dad's 50% inheritance and apply it to your dad's portion of the debt.

As far as your portion is concerned, you didn't file bankruptcy so your 50% designated portion is yours. The bk trustee can't touch it.

I know I, or actually my step-father, should speak with an attorney, but it is hard to address this with him at the moment.

I understand your and your dad's grief, but you or he really MUST contact your mom's lawyer immediately to let him/her know what happened. You need sound legal advice about what to do now, and not just how your dad's portion of the inheritance will be treated inside the bankruptcy. Knowing whether your dad filed with your mom is the first place to start.

Please come back with more questions any time - we're here to help you sort things out any way we can, especially at this most difficult time for you and your dad.

[Flamingo]

I am sincerely sorry to hear of your loss. The answer to your question is very easy; however, you do need to bring this matter up to your mother's bankruptcy attorney because if it was a joint filing, the monies your step-father would receive may be applied to the bankruptcy. However, since you are the beneficiary of the other portion of the insurance funds and are not involved in the bankruptcy, the amount you are to receive is yours and not part of the bankruptcy. If someone tries to tell you otherwise, consult your own attorney to ensure your rights are protected as to your mother's estate.