Can I Keep the Value of My Insurance Policy If I File a Durham Bankruptcy or Greensboro Bankruptcy?


Many of our clients are often concerned with whether they will be able to keep common instances of property such as houses, cars, jewelry, boats, furniture, etc. if they file a Durham Chapter 7 Bankruptcy or Greensboro Chapter 7 Bankruptcy. However, one type of property that is often not thought about by potential Greensboro Debtors and Durham Debtors is the value of a life insurance policy. The question then is, “Can I keep my life insurance policy if I file a Durham Bankruptcy or Greensboro Bankruptcy?”

The answer of course depends. First, there is only value to exempt in a whole life insurance policy. A term life insurance policy does not become payable until the death of the insured. This means that there is no equity in term life insurance policy itself. Accordingly, there is no value to exempt in a term life insurance policy as the policy’s “cash value” is zero.

On the other hand, a whole life insurance policy does have a cash value, usually only after a certain amount of premiums are paid into the policy. Therefore, with many whole life policies, the insured can borrow from the policy itself. Your insurance provider can inform you of the cash value of your policy. Since, your whole life insurance policy does have a cash value; you should treat it as an asset and determine whether you can exempt all or a portion of the policy’s value in a Durham Chapter 7 Bankruptcy or Greensboro Chapter 7 Bankruptcy.

Again, you only have the opportunity to exempt a whole life insurance policy in Durham Bankruptcy or Greensboro Bankruptcy, but only if you are the insured individual in the policy and the beneficiaries are your spouse and/or children. This exemption is found in Article X, Section 5 of the North Carolina Constitution and in North Carolina’s Exemption Statute.

It is very important to note that only the insured can exempt the value of his whole life policy against his creditors. If you are a beneficiary of a whole life policy and the proceeds of the policy are paid to you, then your insurance proceeds will be treated just like cash in your bank account by the Bankruptcy Court and the Bankruptcy Trustee and will only be exempt if one of the other North Carolina exemption laws applies.

For more information about your potential Greensboro Bankruptcy Attorneys or Durham Bankruptcy Attorneys you can call one of our Durham NC Bankruptcy Lawyers or Greensboro NC Bankruptcy Lawyers at (888) 820-5885. You can also email our Durham NC Bankruptcy Attorneys and Greensboro NC Bankruptcy Attorneys at All phone calls and emails will be answered the same day, free of charge by a Durham Bankruptcy Attorney or Greensboro Bankruptcy Attorney.