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Roger
Roger, Attorney
Category: Bankruptcy Law
Satisfied Customers: 26598
Experience:  BV Rated by Martindale-Hubbell; SuperLawyer rating by Thompson-Reuters
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I have both a bankruptcy law and insurance law question. I

Customer Question

I have both a bankruptcy law and insurance law question. I am presently in chapter 13 bankruptcy and only have 5 months left before final monthly payment and discharge. I live in California. My father recently passed away and named me as a direct beneficiary in his life insurance policy. I will probably receive about 10k in the policy. As far as I can tell, there is no specific language in my plan/filing that says I need to inform the trustee of receiving the policy. As I understand it, I only need to do this within 180 days of filing according to the by code. After that, I am not obligated. The claim form for insurance company does however ask that I assert whether or not I am in "bankruptcy proceedings", which is a very vague term.

My questions are as follows:

1. Could the insurance company contact the trustee and inform him of payout if I don't?

2. Legally could the trustee seize these monies according to bk law (and likelihood?)

3. Another approach I was thinking would be to delay my insurance claim for 6 months, for after I get my discharge. Is there a statute of limitations on making life insurance claims and are there any additional risks in considering delaying the claim for this period of time?

I ask these questions because I do not presently have an attorney, he has passed away and I do not want to spend thousands to address this one matter. Can anyone give sound advice on this matter? I would really appreciate it.
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  Roger replied 1 year ago.
Hi - my name is XXXXX XXXXX I'm a Bankruptcy litigation attorney. Thanks for your question.

In a chapter 13 case, the 180 day period doesn't apply to an inheritance. As you know, chapter 13 cases can go on for several month to up to five years, and if you become entitled to an inheritance at any time during that period, the trustee will seek to have the money go to the payment of creditors. That is because under 11 U.S.C. § 1306, “after-acquired” property becomes “property of the bankruptcy estate.”

Thus, you would legally have to report this money to the trustee; if you're so close to completing your plan, the trustee may simply allow you to keep it, but you would have to give that option to the trustee.
Customer: replied 1 year ago.
Kirk, what about the option of delaying my claim for 6 months with the life nsurance? Is this an option and is a statute of limitations for making a life insurance beneficiary claim?
Expert:  Roger replied 1 year ago.
Unfortunately, you can't do that because you're "entitled" to the proceeds at the time of death, regardless of when they are paid out.

Here's a link to the statute: http://www.law.cornell.edu/uscode/text/11/1306
Customer: replied 1 year ago.
Kirk, I'm not so sure I agree with you. How then do I interpret this from 11/541 of the code?

(5) Any interest in property that would have been property of the estate if such interest had been an interest of the debtor on the date of the filing of the petition, and that the debtor acquires or becomes entitled to acquire within 180 days after such date—
(A) by bequest, devise, or inheritance;
(B) as a result of a property settlement agreement with the debtor’s spouse, or of an interlocutory or final divorce decree; or
(C) as a beneficiary of a life insurance policy or of a death benefit plan.
Expert:  Roger replied 1 year ago.
If you read 1306, it says:Property of the estate includes, in addition to the property specified in section 541 of this title -(1) all property of the kind specified in such section that the debtor acquires after the commencement of the case but before the case is closed, dismissed, or converted to a case under chapter 7, 11, or 12 of this title, whichever occurs first; and(2) earnings from services performed by the debtor after the commencement of the case but before the case is closed, dismissed, or converted to a case under chapter 7, 11, or 12 of this title, whichever occurs first.So, this is an additional provision that applies to a chapter 13 case. Here's a link to a recent case that says inheritance in a chapter 13 that is acquired after the 180 day period is property of the estate: http://www.ncbrc.org/blog/2013/01/11/whether-inheritance-received-more-than-180-days-post-petition-is-property-of-estate/
Expert:  Roger replied 1 year ago.
If you read 1306, it says:

Property of the estate includes, in addition to the property specified in section 541 of this title -

(1) all property of the kind specified in such section that the debtor acquires after the commencement of the case but before the case is closed, dismissed, or converted to a case under chapter 7, 11, or 12 of this title, whichever occurs first; and

(2) earnings from services performed by the debtor after the commencement of the case but before the case is closed, dismissed, or converted to a case under chapter 7, 11, or 12 of this title, whichever occurs first.So, this is an additional provision that applies to a chapter 13 case.

Here's a link to a recent case that says inheritance in a chapter 13 that is acquired after the 180 day period is property of the estate: http://www.ncbrc.org/blog/2013/01/11/whether-inheritance-received-more-than-180-days-post-petition-is-property-of-estate/

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