Are life insurance claims exempt in bankruptcy?

You don’t state your exact age or living arrangements, but from what you write, I will assume that you are not at this time a dependent of your father—that instead, you and your wife are adults who are not dependents of, nor dependent on, anyone else.

If that’s the case, then unfortunately, it’s probably not the case that any proceeds from your father’s life insurance would be exempt. The federal bankruptcy law makes exempt “a payment under a life insurance contract that insured the life of an individual of whom the debtor was a dependent on the date of such individual's death, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.”   The proceeds of life insurance flowing to a dependent spouse or dependent children would be exempt, at least in part. However, life insurance proceeds to others—including non-dependent children—are not exempt, at least under federal law.   You do not mention which state you are writing from. States are allowed to have different (often more generous) exemptions than federal law, though many do not—they simply adopt the federal exemptions. It would be worthwhile for you to consult with a bankruptcy attorney familiar with your state’s laws, to see if under them, anything you might get from your father’s life insurance would be exempt.

 

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