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Filing Bankruptcy in Orange County – Exemptions for Life Insurance
13 November 2013

Filing Bankruptcy in Orange County

California permits two different sets of exemptions that may be used when filing for Chapter 7 or 13 bankruptcy in Orange County. Exemptions determine what property (home, car, instrument, retirement account, etc.) you may keep in a bankruptcy. A debtor must use one of the two state exemption systems below when filing in Orange County.

A. Two Exemption Systems

The application of the two exemption systems (referred to as System 1 or System 2) in relation to life insurance policies (whole, universal, or term) are summarized below.

  1. Bankruptcy – California Exemptions – System 1
    • CCP 704.100 – Matured life insurance benefits needed for support of unlimited value, or unmatured life insurance policy up to $11,475 in value
  2. Bankruptcy – California Exemptions – System 2
    • CCP 703.140(b)(7) – Unmatured life insurance policy, other than credit
    • CCP 703.140(b)(8) – Unmatured life insurance contract accrued interest, dividends, loan, cash or surrender value up to $12,860
    • CCP 703.140(b)(11) – Life insurance proceeds needed for support

B. Importance Of Selecting The Correct Exemption System in Orange County

Exemptions are important when filing for a bankruptcy and effect a Chapter 7 and Chapter 13 bankruptcy filing in Orange County differently.

  1. Chapter 7
  2. In a Chapter 7 bankruptcy, exemptions determine what property a debtor can keep (i.e. home, car, personal belongings, pension, or other property). If property is not exempt, a debtor may not keep it after a bankruptcy and is subject to being sold by the assigned trustee to repay creditors. However, if exempt, the property can be kept by the debtor before and after the bankruptcy.

  3. Chapter 13
  4. In a Chapter 13 bankruptcy, exemptions will determine how much a debtor will have to repay to “non-priority unsecured” creditors through a debtor’s Chapter 13 plan.

C. Recap

In short, when filing for bankruptcy in Orange County, a debtor must select the correct exemptions. Bankruptcy exemptions are an important part of the bankruptcy system and if used incorrectly, a debtor’s personal property and/or assets are subject to sale when they could have been protected.

It is crucial to select an experienced Bankruptcy Attorney. Attorney Gregory E. Nassar is an experienced Bankruptcy Lawyer serving Orange County, Riverside County, Los Angeles County, and San Bernardino County. Gregory E. Nassar will review the case, carefully evaluating all assets, and select the appropriate exemption system. These 703 and 704 exemption systems apply to Chapter 7 Bankruptcies filed in Orange County and Chapter 13 Bankruptcies filed in Orange County.

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