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Ellen, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36714
Experience:  Bankruptcy Lawyer. Experienced.
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My father has passed away recently and i live in california.

Customer Question

My father has passed away recently and i live in california. I am presently in a chapter 13 bankruptcy, but 5 months away from my final payment and hopefully, discharge. There seems to be mixed opinions and rulings on whether or not a life insurance policy (to be paid to me as a beneficiary, Not into estate) is part of the the bankruptcy estate after 180 days from filing.

I am wondering 1. If I am required to report this as income to the trustee 2. If i am required to report this, is it exempt from being used to pay off creditors, 3. If I should wait to file the claim for perhaps 6 months or even a yr later to avoid having these funds taken by the trustee after a discharge if #2/#1 apply(what is the statute of limitations for filing an insurance claim and could the trustee "reopen" my case after the 5 yr plan and discharge if he found out ?)

I would have consulted my attorney, but he has passed away and therefore am looking to understand some of my initial options.

Optional Information:
State/Country relating to question: California
Submitted: 4 years ago.
Category: Bankruptcy Law
Expert:  Ellen replied 4 years ago.
*This chat is not intended as legal advice. It is general information that may or may not apply to your situation and should not be relied upon.*


Thank you for your question. My name is FiveStarLaw and I will do whatever I can to answer your questions!

To specifically answer your question, waiting to file a claim would not be helpful. The insurance became an asset of the bankruptcy estate at the time your father died regardless of when you file a claim. Not reporting the existence of the asset would be bankruptcy fraud and if discovered at any time could result in criminal prosecution and loss of your discharge

Now the good news – it appears that you are required to pay apply the inheritance to the bankruptcy only to the extent necessaryto pay off the plan early.

Here is how an inheritance works in a chapter 13 bankruptcy:

Chapter 13 plans must pay 100% or pay all disposable income for at least three years after the date of the first payment under the plan. If your plan is at 100% or you are at least 3 years into the plan, you can pay off your plan early. If not, your proceeds will need to be paid into the plan in addition to the amount stated in the plan.

Please let me know if you have any questions concerning my answer.
Customer: replied 4 years ago.
Thanks for the response. Why is there a 180 day clause then in the chapter 13 code 541a as it relates to life insurance proceeds from the date of filing? Or, why would this not be exempt income? Thanks
Expert:  Ellen replied 4 years ago.

The 180 day period under Section 541(a)(5) refers to the time period of 180 days from the date of filing the petition.

I would be glad to respond to any follow-up questions that you may have.