Legal Question in Bankruptcy in North Carolina

Generally speaking, the creditors of your husband cannot come after your property. Your property and your husband's property is generally separate. (Real property you own is protected from collection.) So, if your husband files for bankruptcy, the creditors (not "debtors") cannot take your property.

If the named beneficiary in the life insurance policy is an individual and not the estate or not named, then the proceeds of the life insurance policy pays the named beneficiary outside of probate. That is, the proceeds are not an asset of the probate estate and not subject to the debts of the decedent. Keep in mind that the owner and the beneficiary of a life insurance policy are different interests. Normally, the owner of the policy is the insured. It could be any person with an insurable interest. If the policy has cash value, that value is subject to the debts of the owner. It would be very unusual for a general creditor to take judgment and levy on the cash value of an insurance policy. In 29 years, I haven't seen that happen by a general creditor. However, a trustee in a Chapter 7 bankruptcy has the right and duty to administer all non exempt assets. He/she could require the policy to be cashed in and used to pay creditors. The solution is to transfer the ownership to a trust or to another person. Thus, if he files bankruptcy, cannot exempt the policy cash value, and you are the named beneficiary, you are at risk to suffer detriment. General creditors of your husband cannot reach your assets held in your name, they can reach his 1/2 of joint assets. Of course, if you signed something that guarantees or promises to pay a debt, you and your assets are on the hook. In some cases, a creditor can rely on the signature on a check to constitute a promise to pay the entire debt. Some states impose liability, without a signed writing, for hospital and doctor bills incurred during marriage and for the medical expense of children to the custodial parent. One should consult counsel with all the details in order to plan for the future even if bankruptcy is not seriously considered at the present time. The trustee can set aside or reverse some transactions that are made prior to bankruptcy. Planning is essential.