Is The Cash Value Of My Insurance Policy Exempt From Bankruptcy Proceedings Or Subject To Claims From Creditors?
The cash value of a life insurance policy can not have a lien placed against it by a creditor. Although, it is considered an asset when applying for a home mortgage and can be considered reserves.
Many home-buyers will use the value of the life insurance policy to satisfy the minimum cash reserves required by many lenders when purchasing a home. If the borrower defaults on the mortgage, the lender can not attach the value of the life insurance policy. The assumption by the lender is that if the borrower were facing foreclosure, they would access the funds on their own to save the family home.
A life insurance policy is fully exempt from any bankruptcy proceeding including Chapter 13, Chapter 7 and Chapter 11.