Beneficiary of Life Insurance

[NeedADoOver]

Hey all. Question. I had met with a lawyer for an evaluation who stated my case seemed to be an open and shut chapter 7 no asset case. I had been in the process of saving money to file the retainer and actually file when my dad passed away a few days ago.

He had me listed as the beneficiary on two insurance policies. The will, which was notarized after the beneficiary forms, states the insurance is to be divided up amongst my siblings.

My question is this. If i recieve these checks from the insurance companies but DO NOT cash them and instead sign them over to one of my siblings, is there anyway the trustee would know this? I will never have handled any of the money. I just don't want to jam up my sibling's inheritance.

[HHM]

What you are suggesting is BK fraud no matter which way you slice it...the serious kind, the kind where the US Trustee gets involved (i.e. the US trustee is part of the Dept. of Justice). To even have chance at the trustee not finding out, you are going to have to commit perjury both on your BK forms, under oath at the 341 meeting...and even though there is lawyer-client confidentiality, your lawyer cannot assist in anyway in helping you commit fraud, so you can't tell your lawyer.

My advice, DO NOT FILE until 6 months has passed from the date your dad died.

[NeedADoOver]

Thank you! Lord knows I don't want to do anything criminal. Just want to avoid hurting my siblings at all. I will try and hang in there for 180 days.

What's the worst case scenario? I understand they can garnish my bank account in pennsylvania but i can just as easily take a live check home (no wage garnishment for bk in pa)... and a judgement against me would go against any future property i own, correct? What if any future assets were strictly in my soon to be wife's name?

Sorry... i am terrified. Thanks for your help... this forum is so valuable.

[HHM]

Why don't we start from the beginning and why don't you fill us in on your circumstances...

i.e. state of residence, yearly income, how much debt, what kind of debt, etc. are you behind on payments, how much is your share of the life insurance, what sort of assets do you own...if we have the bigger picture, we can probably be a little more helpful.

[magyar123]

Contact the insurance cos., and ask them NOT to issue the checks now, but six/seven months from now. They will oblige. They keep those funds in their account and draw interest.

[NeedADoOver]

Why don't we start from the beginning and why don't you fill us in on your circumstances...

i.e. state of residence, yearly income, how much debt, what kind of debt, etc. are you behind on payments, how much is your share of the life insurance, what sort of assets do you own...if we have the bigger picture, we can probably be a little more helpful.

Ok... I live in PA, make roughly $38,000 a year. I have about $23,000 in debt, all of which is unsecured credit card/loans/cell phone bills. I rent an apartment and am financing a car (which is current.) When all is said and done, my share of the life insurance is around $6k. Thanks for taking the time to offer your opinion, i appreciate it. I am glad I didn't do anything harsh.

[HHM]

Does your soon to wife work, or otherwise provide an income?

Are any of the unsecured debts "behind"?

I am not sure BK is right for you, although $23,000 is a high amount of debt relative to your income, it's not insurmountable with proper discipline and if your soon to be wife has income (assuming she does not have huge debt).

Have you considered simply using the $6,000 to pay down the debt to try to get back to manageable payments. If you pay down the $23,000 to $17,000, assuming 2.5% minimum payment and 16% interest rate, your initial minimum payment would be $425.00 per month. If you paid $425 per month consistently, you could be out of debt in 58 months. Granted, this assumes you STOP using credit cards (which you should anyway)

But, if you are already into a default interest rates (i.e. 30%), etc., then perhaps BK is right for you. Unless there is something else in the backgound you have yet to share, BK may be to drastic a step.

[NeedADoOver]

Thank you Unfortunately, I am well behind on these payments. It's been a traumatic 2 years for me, i lost my mom and then my dad a year later to debilitating diseases and i just suffered a severe emotional toll and had to miss work here and there for each of their respective care. All the rates are up, the payments are behind.... I couldn't get back on track again. My fiancee is a full time student. I know BK is the option for me, i've gone over alot of options with lawyers and consultants..... although i sincerely appreciate your time and effort into those calculations.

Also, magyar, I would do that but then that would put my siblings in a bind too (we all need this money in one way or another).... but thank you for your suggestion.

I guess all i want to know now is the worst case scenario... I may be able to hold out for 6 months and file free and clear, but let's assume someone wants to take me to court... I'm in PA, i am not sure if this is correct but is the only action that can be taken is a lien on any property i do acquire? I'm just not sure about what happens around summons time. Thanks all.

[HHM]

Ok, I see...if you are in default, you are correct, you don't really have other options but to file BK.

The worst case scenario for you in your case, would be wage garnishment as a result of a lawsuit. If a creditor were to get a judgment against you, they could garnish your wages, and levy your bank account (i.e. take all the money out).

At the same time, I would hate to see you throw that $6,000 down the toilet by filing BK. Also, having the insurance company hold the check won't work (actually, that is NOT a good idea), because it becomes part of the BK estate...it's not the money, per se, that becomes part of the BK Estate, its your RIGHT TO RECEIVE it. So, if the insurance company holds onto it, and you file BK, and the trustee finds out, the trustee can simply go get it.

This all assumes there is no exemption to cover the insurance proceeds.

But at this point what, you don't want to do is sign it over to anyone. Do you have an IRA...maybe you should considering opening one. I think the max yearly contribution is now $5,000 and with your income, you can qualify for a regular IRA. You are allowed to take non-exempt assets and turn them into exempt assets. Assuming PA has an exemption for IRA accounts (talk to a lawyer), you can take the insurance proceeds and drop at least $5,000 into an IRA, and then just spend the other $1,000.

[NeedADoOver]

Ok, I see...if you are in default, you are correct, you don't really have other options but to file BK.

The worst case scenario for a lawsuit, in your case, would be wage garnishment. If a creditor were to get a judgment against you, they could garnish your wages, and levy your bank account (i.e. take all the money out).

At the same time, I would hate to see you throw that $6,000 down the toilet by filing BK. Also, having the insurance company hold the check won't work (actually, that is not a good idea), because it becomes part of the BK estate...it's not the money, per se, that becomes part of the BK Estate, its your RIGHT TO RECEIVE it. So, if the insurance company holds onto it, and you file BK, and the trustee finds out, the trustee can simply go get it.

This all assumes there is no exemption to cover the proceeds.

But at this point what, you don't want to do is sign it over to anyone. Do you have an IRA...maybe you should considering opening one. I think the max yearly contribution is now $5,000 and with your income, you can qualify for a regular IRA. You are allowed to take non-exempt assets and turn them into exempt assets. Assuming PA has an exemption for IRA accounts (talk to a lawyer), you can take the insurance proceeds and drop at least $5,000 into an IRA, and then just spend the other $1,000.

Thank you. I will look into these options. I appreciate your time!

[jp2861]

Contact the insurance cos., and ask them NOT to issue the checks now, but six/seven months from now. They will oblige. They keep those funds in their account and draw interest.

What you're recommending is fraud. If the filer has knowledge of any anticipated monies and conceals the fact it's fraud. If you have anything to back this up as NOT being fraud I'd love to hear about it.

[NeedADoOver]

What you're recommending is fraud. If the filer has knowledge of any anticipated monies and conceals the fact it's fraud. If you have anything to back this up as NOT being fraud I'd love to hear about it.

Yeah I'm not doing that, i'm going to hold out for 180 days. Luckily, PA doesn't have wage garnishment except for child support... so i can just take a live check home in the meantime to prevent my bank account from taking a hit. Then when a little after 6 months rolls around, i'll file.

One other thing... when I file, does anything happen to the (if any) judgement on record? All the things i've seen say if you recieve an inheritance within 180 days of filing you have to report it, is it safe to assume that also goes for inheritances recieved 180 days before filing?

[keepmine]

is it safe to assume that also goes for inheritances recieved 180 days before filing?

After 180 days, the inheritance is an asset that may well be exempt- depending on what sort os exemptions your state allows. Don't be in a hurry to file. HHM makes agood point about the IRA. Worse case, spend it on living expenses. Don't let your creditors get it.

What do you mean by a judgment on record?

[HHM]

is it safe to assume that also goes for inheritances recieved 180 days before filing?

After 180 days, the inheritance is an asset that may well be exempt- depending on what sort os exemptions your state allows. Don't be in a hurry to file. HHM makes a good point about the IRA. Worse case, spend it on living expenses. Don't let your creditors get it.

What do you mean by a judgment on record?

Yes, same rule applies for inheritance.

[backontrackOH]

HHM, I am not sure I follow you on the beneficiary proceeds. In your first post, you advise to wait 180 days before filing, which I am assuming is to avoid having the proceeds become the property of the bankruptcy. In a later reply, you give advice of contributing the proceeds to an IRA. If the beneficiary proceeds are considered as an inheritance, wouldn't the trustee demand the money anyway? Are insurance beneficiary proceeds considered an inheritance, or just income? Thank you in advance for your reply!