Wayne, New Jersey. The Scura firm saved a bankruptcy client the proceeds of a one million dollar life insurance policy and still discharged the client's unsecured debt. The firm represented husband and wife debtors that did not have any assets above the federal exemptions, but both debtors did have term policies naming each other the beneficiary. Tragically, the husband suddenly passed away after the filing of his petition, leaving his wife as the beneficiary of a one million dollar ($1,000,000.00) life insurance policy. Joseph Reilly, Esq., a Scura Firm bankruptcy lawyer, was able to successfully amend the clients' schedules to choose the state exemption scheme, and fully exempt the policy. This allowed the wife to receive a discharge of her debts, which were over $200,000.00, as well as receive the full amount of the life insurance proceeds.
The Scura firm successfully argued that under the New Jersey state exemption scheme, any proceeds that a debtor receives from a term life policy of a deceased spouse are deemed fully exempted from creditors of both the insured and the beneficiary of the policy. N.J.S.A. 17B:24-6. Under the federal exemption scheme, such a life insurance policy would be exempt only to the extent reasonably necessary for the continued support of the debtor and his or her dependents. 11 USC 522(d)(11)(c). Thus, if a debtor filed bankruptcy and chose the federal scheme, the Trustee appointed to protect the interests of creditors, could attempt to recover the life insurance proceeds and pay existing creditors from such proceeds; under the State scheme, such a policy is exempt and the Debtor would receive the entire proceeds from the life insurance policy. As a result of the successful argument before the bankruptcy court, the firm's client was able to save her home from foreclosure, wipe out her unsecured debts, and keep her million dollars in insurance proceeds. Scura, Mealey, Wigfield & Heyer are a New Jersey Law Firm with offices in Wayne and Hoboken, New Jersey.
