Bankruptcy Proposals and Your Life Insurance Policy
When you file a Proposal, your Trustee who acts as the Administrator of your proposal will ask you for a copy of your life insurance policy. He is doing this to determine if the life insurance policy is a term insurance policy (no cash value) or a whole life policy (possible cash value). It is very unusual for a proponent (the debtor who files the proposal) to offer to the creditors any part of the cash value of an insurance policy. There is, however, the requirement to inform the creditors if there is any cash value to an insurance policy. In this way, the creditors have full disclosure of your assets and liabilities when they vote on accepting or refusing your proposal.
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