Insurance for bankruptcy or proposal

December 13th, 2006 by Questions

Is it wise (or necessary) to purchase life and disability insurance to cover a bankruptcy or consumer proposal? What happens in the event of a disabling accident or death of a bankrupt?

Questions

2 Responses to “Insurance for bankruptcy or proposal”



, A licensed trustee said:

In the event of the death of a bankrupt, any life insurance proceeds the bankrupt may be entitled to go to the bankrupt’s estate, which would presumably complete the bankruptcy. If there is no life insurance, the bankruptcy would either run until it’s completion, or it would never end, and the bankrupt would never be discharged.

Disability insurance is a wise option for many people if they are not covered through work. In the event of a disability, the payments in a proposal are probably the least of the debtor’s worries; they would probably be more concerned with paying for rent, food, and other expenses. I would advise the debtor to determine the cost of the insurance to determine if the risk of disability is worth the expense, and then contact a licensed trustee to determine which course of action is most appropriate.



, A licensed trustee said:

I have never heard of anyone buying (or for that matter selling) insurance to provide coverage during a bankruptcy or proposal.

If a bankrupt dies during the procedure (it happens in about 1 out of every 500 files or so)then, in most cases, the trustee will still complete the procedure simply to clean things up for the executor.

If a person becomes disabled (or their income changes for any reason) they should contact their trustee and discuss how best to proceed – every case is different so there’s no single answer to you question.

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