Law Office of Phil Hineman

Group Life Insurance Proceeds and Bankruptcy

Recently, the U.S. District Court reversed the Bankruptcy Court’s ruling on whether A.R.S. 20-1132 provided an exemption for the surviving Debtor when their spouse had passed away after the filing of a bankruptcy.  The recent ruling establishes that the statute did intend to provide an unlimited exemption in those proceeds in that Trustees are not allowed to seize those funds to pay creditors of the estate.  This exemption had remained an assumed, but untested rule.  Now, depending on whether there are further appeals, the statute has a judicial ruling that backs the practical effect of the statute.