20 Apr 2018

Finding Assets in Insurance Policies

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In Chapter 7 bankruptcy cases, assets can be recovered in unusual ways. For example, insurance policy proceeds can be recovered as assets for the estate depending on when the instance occurred and if exemptions apply.

Accident Insurance

If the debtor experienced a personal injury prior to filing Chapter 7 bankruptcy, accident insurance proceeds are the property of the bankruptcy estate unless the debtor is able to file them as exempt.

However, if the injury occurs after the filing, the proceeds are excluded from the estate.

Life Insurance

Life insurance proceeds can be recovered if the debtor is entitled to them on account of a death that occurred before or within 6 months after the Chapter 7 filing.


It is important to note that debtors can claim insurance policies as exemptions, which are governed by state and federal law. For example, some states have generous exemptions for insurance proceeds, but others are more restrictive.

Individual states can opt out of federal exemption schemes, so if a debtor’s state has opted out, the exemption is governed by the state’s laws. If the debtor’s state has not opted out, the debtor can choose between using the federal exemption scheme or state exemption laws.