Bankruptcy Cases Not Predictably Simple

freeway road ahead

I’ve been aghast at the willingness of lawyers brand new to bankruptcy practice to take on cases and issues far beyond their current competence.  I’ve tried to gently counsel that  both self preservation and the client’s best interest require the inexperienced to pass on cases beyond their present skill set.

I realized just how glib  and unrealistic that advice could be yesterday when a young lawyer asked about the impact on a Chapter 13 case should the debtor receive life insurance proceeds during the case.  Everything else about the case in question was vanilla simple;  the question of a windfall during a 13 is not, where I practice anyway, an obvious or settled question.  And the death of a loved one not necessarily predictable.

People are what makes this practice perpetually intriguing, and people’s lives take turns and twists.  We try to look as far down the road as possible, but issues lurk in the turn outs and the cross streets. We can’t foresee every complication that may arise in even simple cases.  We just have to be prepared to respond.

My thought on the possible life insurance payment was to consider whether the owner of the policy would consider changing the beneficiary designation to leave any proceeds to the debtor in a spend thrift trust.  Then we don’t need to speculate on what the answer to property of the estate and vesting questions is.

Photo courtesy of notelse.

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  • Michael Marr

    A friend has a Chapter 13 where Debtor 1 died and left Debtor 2 $20k in life insurance proceeds. Attorney was trying to adjust medical expenses on J to eat up some of the money. I inquired of Debtor 2’s age (over 60) and whether she had any other pension or retirement. She did not so I suggested he try to keep the whole 20k from the hands of creditors since it would/could/should be her retirement. Don’t know the outcome of that yet.

    • http://www.moranlaw.net Cathy Moran

      Good thinking. California has an exemption in state law for insurance proceeds necessary for support as do the federal bankruptcy exemptions.

  • http://www.scbankruptcyattorney.com/blog Russ DeMott

    Great post, Cathy! This is why the “one size fits all” fee scheme doesn’t work as well. Bankruptcy lawyers AND clients should be aware that each case is unique and has unique requirements. A cookie cutter approach is a formula for disaster.

    By the way, great site! It’s very attractive and user-friendly.