Can You Purchase Life Insurance

[arlington]

Can you purchase life insurance while in a 13?

[justbroke]

Some will say yes, some will say no. You have to be able to articulate that the expense is for the health and welfare for you or your family. As long as you can articulate it, it should be not problem.

For example, you may be the bread-winner and your spouse doesn't work. You have 3 children. If your income is lost due to death or dismemberment... life insurance can be justifiable.

Also, the type of life insurance policy will have weight as to whether the court would approve the expense for life insurance.

[Flamingo]

Ask your attorney.

[arlington]

I plan to - just wanted to hear what other people have experienced.

[woeisme]

My husband and I both have policies, are allowed as expenses in our CH 13. My understanding is that they had to be term policies, not whole life because those are investments rather than insurance? But I had a pretty reasonable trustee, and our combined payments was under $50 a month for insurance policies, so maybe that's why they allowed it.

[justbroke]

My husband and I both have policies, are allowed as expenses in our CH 13. My understanding is that they had to be term policies, not whole life because those are investments rather than insurance? But I had a pretty reasonable trustee, and our combined payments was under $50 a month for insurance policies, so maybe that's why they allowed it.

You're right... it's the type of policy. I tried not to get into that area of my response.

Term Life insurance policies are okay. Whole Life policies are investment instruments (with a cash value). The key term is "cash value". The Trustees, and the code, won't allow the policies with a cash value. Most States will protect your existing "cash value" policy through Exemptions, so there's no need to worry about an existing one.

The problem comes with premiums. There have been cases where $300 in premiums are allowed for Term Life policies. The key is, is it for the benefit of your family should you perish or lose a limb?

If you're single... it will be hard to justify. if you're married, the bread winner, with a spouse who doesn't work (or even does, but isn't the key income), and have children... it's a no brainer! You should have it regardless of Bankruptcy, if you have a family that depends on your income.

I purchase extra Term Life and Long Term Disability with a 66 2/3% salary option for those reasons. They are in my plan. I haven't heard an objection yet.

[Flamingo]

I plan to - just wanted to hear what other people have experienced.

The reason I stated, "Ask your attorney" was because you said you wanted to "purchase" life insurance during a Chapter 13. Any expense that you want to take on during your Chapter 13 that interferes with your disposable income and that would be in an amount which the trustee may not like could cause issues as your Chapter 13. Some folks might be able to do this, some not. Each matter is different. A small term life insurance policy may not be an issue while a large whole life policy with a large premium would raise all sorts of red flags. Remember, as I always state on here and so do many others, your finances are not yours during the course of your plan - your financial estate is under the control of your Trustee. Always ask your attorney before you make any financial moves, want to obtain credit, receive additional funds during your plan or lose income during your plan. After discharge it's all yours again.

[chloe0724]

I was told by my attorney that if we take on any more thigs that cost extra money, we would have to find a way to cut something else. Getting a plan modifyed in my district is really hard unless you have major changes.

[krielly]

Arlington,
Are you already confirmed? How much of an expense are you talking?

K

[arlington]

I am already confirmed. Looking at appx. $100 extra a month.

[krielly]

Let me start by saying, I'm no lawyer, but as long as you can afford it, and you are still able to make your plan payments, I don't know why it would be a problem.........

You're not allowed to borrow any money while in a 13, but this isn't borrowing money. Think about it, suppose your budget for food each month is $600. If you were to spend $700, the trustee is not going to swoop in and say "wait, you're not allowed to spend an extra $100/mo on groceries, cause it's not in your plan.

If you can cut corners in other areas of your budget to come up with the $100, I don't see a problem with it. Again, as long as you are making your plan payments on time, I'm not sure this should be an issue.........

As mentioned, I'm not a lawyer, but I just don't see this as problematic.

K

[Flamingo]

Let me start by saying, I'm no lawyer, but as long as you can afford it, and you are still able to make your plan payments, I don't know why it would be a problem.........

You're not allowed to borrow any money while in a 13, but this isn't borrowing money. Think about it, suppose your budget for food each month is $600. If you were to spend $700, the trustee is not going to swoop in and say "wait, you're not allowed to spend an extra $100/mo on groceries, cause it's not in your plan.

If you can cut corners in other areas of your budget to come up with the $100, I don't see a problem with it. Again, as long as you are making your plan payments on time, I'm not sure this should be an issue.........

As mentioned, I'm not a lawyer, but I just don't see this as problematic.

K

I agree with Kreilly but the issue here is if the OP purchases this life insurance at $100 per month thinking cuts can be made somewhere to continue it through his plan and then finds out after several months he cannot make his plan payment or pay other bills due to taking on an additional payment. If he can slice $100 per month for the rest of his plan out of the food budget or get his utilities down $100 per month, and be able eto do that for the next several years, that is an option. However, under any financial circumstances such as this it is always best to check with one's attorney before taking anything like that on...The OP will probably get a response to go ahead and do it but it if interferes with making his plan payment or other bills, he would have to cancel the policy. That is the response I received when I wanted to recontribute to my 401(k) plan a few years after filing after stopping contributions before filing. But I did check first before doing anything on my own.