If I just filed for bankruptcy, what happens to life insurance proceeds that are payable to me?

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If I just filed for bankruptcy, what happens to life insurance proceeds that are payable to me?

My mom died 3 months ago. I am the beneficiary in her life insurance and need to share this little money ($5000) with my siblings (7 of us). I filed for bankruptcy and was approved last month. Do I need to report this to my trustee? Will the creditors take this money from me?

Asked on September 19, 2011 under Bankruptcy Law, Indiana

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

I am so sorry for your loss.  The general rule as to inheritance and bankruptcy is that any inheritance that is received with in 180 days of filing for bankruptcy is party of the bankrupt estate.  You must them report it to the trustee. Here is the law:

“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 bequest, devise or inheritance..." 

I think that you may be stuck here.  I would consult with an attorney on the matter.  Good luck to you.


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