Legal Question in Bankruptcy in Tennessee

Re: Life Insurance

Hi.

First, let me say I'm very sorry for your tragic loss, and all of your difficulties to date. I've lost people who are near and dear to me, and nothing can substitute for them.

All right: please forgive the way I speak, but I am a plain speaker. I always counsel my clients to obey the law to the fullest. I know some attorneys who tell people to see if they can get away with things. But I feel that if you're caught, you'll lose the money that you would lose anyway, and could even be convicted of a bankruptcy crime (felony, with up to $5k fine), for hiding property of the bankruptcy estate.

That having been said, there is no doubt that your policy inheritance is property of the bankruptcy estate. But before just giveing it over to the trustee in your case, why not try this: get your attorney to establish an escrow account with the $100k debt in it. Make a motion to dismiss, with a statement that the dismissal is predicated on the payment from the escrow fund of the $100k to your creditors.

This way, you avoid the trustee fees and attorney's fees and accountant's fees for the trustee, and you get the tax deduction for the discharge of indebtedness under Section 108 of the IRC, and you get to keep the $900k extra. (You may have to pay a small bit of money to your attorney and the trustee, but nothing compared to the fee of the trustee if he or she administered it for the estate ... . I know: i'm a trustee.

This is clean and keeps you clear forever. I know it means you lose $100k of the policy.

That's my advice. Like I say, I don't play games with "you may not be caught", since if you're the 1 in 5 who gets caught, you'll regret it badly (althought the bankruputcy crime statute does say you have to violate it knoingly and intentionally, and you can always say you just didn't know.... But I'M NOT KIDDING, I NEVER LET MY CLIENTS DO THIS. I JUST AM SAYING IT BECAUSE THERE ARE ATTORNEYS OUT THERE WHO DO THIS, AND I WANT TO LET YOU KNOW ALL YOUR OPTIONS, ALBEIT THAT I WOULD NEVER LET MY CLIENTS DO IT AND IF I WERE YOUR TRUSTEE, NOTWITHSTANDING ALL MY SYMPATHY, I'D COME AGAINST YOU HARD, IF YOU DON'T DO AT LEAST THIS.)

Good luck, and again, I'm so sorry for your loss and pain.

Neil Ackerman 516-228-8245