posted
It seems that in the USA, in many states - if not all - life insurance and some other types of insurance will be protected from creditors in a bankruptcy situation. However I've been unable to find correct citations/statutes for this, which is where I was wondering if you guys could help out. The main problem is that I'm unsure of exactly how your legal system works as it's very different from ours.
The most I've been able to find is for example "Law Section 25-13-608(1)(e)" for Montana, but that doesn't tell me what statute it's from etc. I just need a brief "refer to X Act 1967" for footnotes.
Obviously I can't cite every state, though, and many of the laws on this seem to be similar in different states. Do these sort of laws apply cross-state or would it be a different source for each?
quote:[7] Unmatured Life Insurance Contract; § 522(d)(7).
Because the Code gives the states the power to opt out of the section 522(d) exemption scheme, state exemption laws that pertain to insurance policies are of great importance. But because these financially significant exemptions vary greatly from state to state, a comprehensive classification of insurance exemption provisions throughout the United States is a practical impossibility in this work. Recourse must be had to the particular statutes involved and the court decisions interpreting them.57
Under the Code, the debtor in a non-opt-out state who chooses the section 522(d) exemptions is allowed an exemption of any unmatured life insurance contract that the debtor owns.58 This exemption is not applicable to credit life insurance contracts. It refers to the life insurance contract itself and does not encompass any other rights under the contract, such as the right to borrow out the loan value.59 (An exemption for the loan value is dealt with in subsection (8) of section 522(d).) Because of the exemption under subsection (7), the trustee may not surrender a life insurance contract that remains property of the debtor if the debtor chooses the exemptions granted by section 522(d).60
The section 522(d)(7) exemption includes the debtor's rights in a group insurance certificate and may be claimed if the insured is either the debtor or an individual of whom the debtor is a dependent.61
The determination of whether a debtor's interest in a life insurance policy is exempt is made as of the commencement of the case. That is, the policy must be an unmatured insurance policy as of the commencement of the case. For example, in In re Walters ,62 the debtors claimed as exempt an insurance policy on the life of their son under which they were the beneficiaries. The son died about one week after the commencement of the case, and the debtors claimed the entire proceeds of the policy as exempt. The Fourth Circuit affirmed the lower courts that had allowed the exemption. The court noted that the proceeds would have been property of the estate under section 541(a)(5)(C); however, the asset had already been exempted from the estate under section 522(d)(7). Therefore, the post-exemption increase in value was irrelevant to the debtors' right to the property. One court has suggested that this analysis is erroneous because it does not address the presence of section 522(d)(11)(C), which provides a limited exemption for certain life insurance proceeds.63 However, that exemption is directed to the debtor's right to receive payments under a life insurance policy that matured before the commencement of the case. Therefore, the Walters analysis is appropriate. 4-522 Collier on Bankruptcy - 15th Edition Revised P 522.09
Do you have access to this source on Lexis? There's a breakdown by state.
Posts: 26071 | Registered: Oct 2003
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I'm not sure how it affects paymouts from health or life insurance, but certainly in Australia you cannot actually get any other kind of insurance if you are an undischarged bankrupt. You will not get any kind of home, property or car insurance during the period of your bankruptcy.
This is most likely not a government thing, but mandated by the insurance firm as part of your credit rating.
Ah, here it is:
quote:Certain assets are protected by the Bankruptcy Act which means they cannot be sold by your trustee to pay creditors. The property protected by the Bankruptcy Act includes necessary household furniture, personal effects, limited tools of trade, life insurance and superannuation policies and the primary means of transport up to the prescribed amount in value (eg. car or motor bike).
posted
Interesting, Troubador. Thanks for that. It sounds similar to the NZ provisions except life insurance is not protected anymore here (it used to be, and I'm yet to discover why they changed it).
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quote:Originally posted by tt&t: Is the Montana "Code" a statute?
"Senate Bill No. 1, adopting the Montana Code Annotated (cited "MCA"), was passed by the 1979 Legislature and became effective January 10, 1979. ... The MCA is a compilation of existing general and permanent law, including the acts of the 59th Legislature of 2005 in regular session."
Does that answer your question?
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In the US, we have codified law (well, and common law). Bills and acts that are passed which change the law modify the code through deletion, insertion, appendment, and amendment. So the code is the law.
I said look at the bottom because it tells you the history of that section of the law: when it was entered, when it was amended, and by what. Those are the "acts" you would look up to find where the particular bit of code in question entered the law. You can find those bills by looking on the site of the montana state legislature (well, back to 1999 at least).
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posted
Sorry, Kylie - have been interstate and avoiding law.
I think the "Code Law" in the US works the same way the Criminal Codes in Australia do - ie, they're created by statute to codify commom law. They are referred to as "Codes" but essentially are just statute law - and can be modified or repealed as normal.
As far as insurance and bankruptcy - I have *no* idea. When is your paper due in? I can proprably find out a little over the weekend if you want.
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posted
*pat pat* And early here. But just because I'm only half awake doesn't mean I can't tease you about being half asleep. Posts: 32919 | Registered: Mar 2003
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posted
No, its more than that. Code isn't just codification of common law, though there's a lot of that. Code is basically all of the law (sometimes with the constitution in question separate) for that government.
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Fugu - yes. The traditional role of a Code is to codify existing (ie, common) law (hence the terminology) but is has changed. Its is now a statute, made by parliament.
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posted
In common usage (among lawyers, or at least the two places I've worked so far), when we refer to "the Code" we mean the U.S. Code or the state equivalent. The official definition is "The United States Code is the codification by subject matter of the general and permanent laws of the United States. It is divided by broad subjects into 50 titles and published by the Office of the Law Revision Counsel of the U.S. House of Representatives."
It doesn't codify common law, it organizes statutes that have been passed. Some of those statutes codify common law, but it's the organization into Titles, Chapters, and Sections that people think of as the core attribute of the Code.
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posted
I was just clarifying that if around here you were told to look at a law or statute, you could look in the code and find it Posts: 15770 | Registered: Dec 2001
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posted
Dag, the summaries you sent from Colliers are very helpful. I do have access to Lexis, but haven't had a chance to go there yet this morning (it's 8.30am here). Do I just cite the code or statute listed (eg "Alabama Code s 6-10-8") or do I need to cite Colliers, or ... something else? Citations here are so much easier. Probably just because I know the proper formation here, though. Basically I just need an example of a correct citation so I can base the others on it.
posted
I would cite it Ala. Code § 6-10-8. Each section has the abbreviation for the state statutes at the top.
Alaska Stat. § 09.38.025, Ark. Code Ann. § 23-79-131, etc.
State statute citations suck, although most people remember the format for the few states they work in most of the time.
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posted
Okay, cool. You said something about federal exemptions, do these apply to all states? Actually, this sounds like it might have a complicated "in some circumstances" sort of answer; if it does, don't worry -- I'll just use a few different state examples.
Imogen, the Bankruptcy Act 1966 s 116(2)(d)(i) seems to exempt life insurance from creditors (with some exceptions under subs 5 obviously). Does that sound right to you? Also, I'm assuming this applies to all states?
Silly countries with different laws in different places.
posted
There are supplemental exemptions that apply to all states. I linked them above, but it's not an official source.
Some states allow the debtor to choose to use state exemptions or federal exemptions. In that case, a different set of federal exemptions, also listed above, are used, and the supplemental federal exemtpions are not.
So in states that give debtors a choice, the debtor's exemptions are either state plus federal supplemental or federal without supplemental.
Caveat: This is all based on that one web site, not any primary sources or classwork. Use at your own risk, but I bet it won't be hard to confirm somewhere.
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