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Question: I have filed Chapter 7 as my husband passed away in Dec. My house hold income has reduced MORE than half. My only resource to pay off my 1st mortgage is the life insurance monies. My 2 adult daughters and 1 son-in-law (to be) also live with me. Going to school and working odd jobs as they arrise. The Trustee of the Bankruptcy court has determined that the life insurance accounts are to be siezed by the court. My lawyer has assured me that this could not happen. I have found several law sites that support his opinion.My question is "how can the Trustee do this"?
Response: The trustee can file a Motion with the Court and requests that the Court force you to turn over the life insurance proceeds. However, the trustee would not prevail. Your attorney is right. The life insurance proceeds are exempt from execution pursuant to 11 U.S.C. Section 522(d)(11)(C)
So WHY would the Trustee even attempt to do this?
Response: Because the trustee gets paid some of the proceeds if he prevails. Also, the law in question does not say that all proceeds are exempt but only to the extent that is necessary for the support of the insured's dependents. So, the trustee is hoping that the Court may rule that all the proceeds are not necessary for the support of the dependents and that portion should be turned over to the trustee. See 11 U.S.C. Section 522(d)(11)(C):
But you sound pretty sure that the Trustee could NOT win this battle, right?
Is he just picking on me?
Yes, I have over $100,000 in life insurance proceeds, that I intended to pay off my 1st mortgage with. Without this money I will have to lose my home as I am not able to make the mortgage payments on my salary alone. I get NONE of my husbands pension and there was no mortgage insurance, the life insurance was to cover that.
What will I have to do to fight this ruling? What CAN I DO?
Response 1: No, he is not picking on you. He is trying to see if he can get some funds on behalf of your creditors.
Response 2: Show that the proceeds are needed for the support of the dependents. I am sure that your attorney would be ready to respond to the Trustee's Motion for you to turn over the proceeds once the Trustee files the Motion.
The Trustee played the sneaky card. After being read and having the Exemption Law for life insurance "explained" to him by my lawyer, he waited till Friday (29th) to file the motion, so I got notice on Saturday when, tada! All offices were closed! I know my lawyer will fight it but how long can this drag out? Up until last week I hadn't had contact from my lawyer since I went to court on March 14th. My 60 days is up May 13th, 2 weeks and NOW the Trustee does this!!!!! Is this really the way this is sauppose to go? Waiting till the last hour? Will My Life accounts be frozen? I just made my May house payment and paid for the water heater replacement from this account on Saturday.
The Trustee played the sneaky card. After being read and having the Exemption Law for life insurance "explained" to him by my lawyer, he waited till Friday (29th) to file the motion, so I got notice on Saturday when, tada! All offices were closed! I know my lawyer will fight it but how long can this drag out?
Response 1: Unfortunately, it could be for a quite a well. Depending on the Trustee and your attorney, 6 months is not unheard of.
Up until last week I hadn't had contact from my lawyer since I went to court on March 14th. My 60 days is up May 13th, 2 weeks and NOW the Trustee does this!!!!! Is this really the way this is sauppose to go?
Response 2: Not exactly.
Waiting till the last hour?
Response 3: No. the Trustee would usually let you and your attorney know if he has concerns with your exemptions.
Will My Life accounts be frozen? I just made my May house payment and paid for the water heater replacement from this account on Saturday.
Response 4: No, your accounts would not be frozen. It is Monday. So contact your attorney and let the attorney handle the response to the Trustee.
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