briarpatch

Ex-husband/cosigner has died leaving me life insurance

Recommended Posts

Hi I'm new.

I have a credit card debt for $10,000 which has been purchased a few times, the latest by a lawyer's company. I haven't worried about it because I am on disability and judgement proof, and expected to stay that way.        

The lawyer is sending letters to myself and my ex-husband. I haven't worried about this, as I think(?) it is unlikely a judge would give a judgement against him when it was entirely my own debt, incurred after our divorce.

We have been divorced for some time. The entire balance was charged to the card by me as one purchase: my own dental work, after our divorce.

I added my ex-husband to this credit card when we were married. The bank said the only way to remove him was to close the credit card account (I did not). The credit card statement I receive has both of our names in the address/salutation.

Now my ex-husband has died. His life insurance comes to me in a substantial amount. His IRA beneficiary is his father. His home is going through probate to his father as next-of-kin. 

Will this lawyer be able to find out that he has died? How long might that take? Is it as easy as a few key strokes on the computer? Will they be able to find this money (mine, his father's and his probate estate)?

Also, can they find a safety deposit box if I don't have an account at that financial institution?

Thanks much.

 

Share this post


Link to post
Share on other sites
35 minutes ago, briarpatch said:

Will this lawyer be able to find out that he has died? How long might that take? Is it as easy as a few key strokes on the computer? Will they be able to find this money (mine, his father's and his probate estate)?

Probably.  There's no telling how long it will take.  If the probate case has already been opened, the case can be located immediately.  It just depends on if/when the lawyer looks for it.  Debt collection lawyers often subscribe to notification lists so they get notified when one of their debtors names comes up in a public record.  Since your husband's name was on the account, he will definitely be included in any such notification search.

In most cases, the only way a creditor can intercept estate distributions is if there as been a lien recorded with the county recorder, and this can usually only happen after a debtor has been sued, and a judgment granted in the creditor's favor.  If you haven't yet been sued, you're probably ok, but you might want to have a chat with an actual Nevada estate lawyer to be sure.  

Share this post


Link to post
Share on other sites
5 minutes ago, briarpatch said:

Thanks for the excellent reply.

Will my life insurance payout also be a public record that might have an automatic notification?

 

I don't think so because insurance is a private transaction that does not go through probate. It the insurance amount is substantial enough, I would make an offer to make this go away.

Just a note that if there is an estate, a creditor can put in a claim that they are owed moneys by the descendant. Note that only the house and any non-retirement amounts are usually in the estate. IRAs are usually treated like life insurance and thus a private matter.

Just a case in point, my father died in 1996 owing back child support and back taxes and his children still received the life insurance funds without the government knowing.

Share this post


Link to post
Share on other sites
8 minutes ago, briarpatch said:

Will my life insurance payout also be a public record that might have an automatic notification?

If you were named as a beneficiary on the policy, the asset should pass directly to you.  If it's going to you through the estate/will, then it will be a matter of public record.

Share this post


Link to post
Share on other sites
2 minutes ago, WhoCares1000 said:
 
 

I don't think so because insurance is a private transaction that does not go through probate. It the insurance amount is substantial enough, I would make an offer to make this go away.

Just a note that if there is an estate, a creditor can put in a claim that they are owed moneys by the descendant. Note that only the house and any non-retirement amounts are usually in the estate. IRAs are usually treated like life insurance and thus a private matter.

Just a case in point, my father died in 1996 owing back child support and back taxes and his children still received the life insurance funds without the government knowing.

thanks for the reply

Share this post


Link to post
Share on other sites
2 minutes ago, Harry Seaward said:

If you were named as a beneficiary on the policy, the asset should pass directly to you.  If it's going to you through the estate/will, then it will be a matter of public record.

thanks again

Share this post


Link to post
Share on other sites

Hi, another question...

My Metlife life insurance payout was automatically added to a Metlife "Total Access Account" with an interest rate of .9% and no FDIC insurance. I would like to move this to a higher rate account that is FDIC insured.

I know that life insurance payouts are not taxable, and cannot be accessed by creditors (as we discussed partially above).

Having received the life insurance payout once, if I now move the funds to an FDIC insured savings or money market account, will this then expose the money to judgements by creditors?

I know that as long as I have my Social Security Disability checks deposited directly into my checking account and don't move these funds into another account before spending them, they are not accessible to creditors. If I move these funds, they lose their judgement proof status.

Thanks.

Share this post


Link to post
Share on other sites

If you move the insurance payout to a FDIC-insured account, it would certainly make it easier for creditors to find it.  I don't know if this would affect the exempt status.

Be aware that judgment creditors tend to levy first, ask questions later.  It will be up to you to prove the funds were exempt, and that will take time and money.

Share this post


Link to post
Share on other sites

Again, what is the life insurance amount? If it is enough to pay this off or offer a decent settlement, I would do that rather than worry about keeping it for myself. You do owe this debt and they should be paid something if you have the means to do so.

Share this post


Link to post
Share on other sites

Hi, the payout was $37,000. Over the last several years, I lived on, then defaulted on over $40,000 in credit card debt. My only income is $1005.00 per month in Social Security Disability. The only reason I am not homeless is I qualified for state subsidized housing.

Share this post


Link to post
Share on other sites

You don't need a lawyer. Here is what you do. You call your first creditor and offer them 25 cents on the dollar to pay off the debt. When you make the offer, inform them that you came into a little bit of money but that you owe 4 times what you came into and with your financial situation, your only other alternative is to do a BK. If the first one does not accept, work the rest. Eventually they will come around. You might want to go as high as 33 cents to 50 cents on the dollar.

If they don't then buy a $14000 car and do a BK 7. I certainly qualify and can get a lawyer at that point. By the time you pay the lawyer and the taxes, registration, and insurance on the car (you can exempt up to $15000 in car equity plus $10000 wildcard exemption in NV), your creditors will be fighting over $2000 to settle $40000 rather than getting the $10000 you are offering. Don't threaten BK unless none are biting at the higher amount.

If they do bite on the offer (and I am sure at least some will bite if you lay bare what your financial situation is, they will see that you are a BK 7 waiting to happen without you having to state it), make sure to get it in writing that this settles the debt and DO NOT allow them electronic access to your bank account, instead send a money order or bank check to them. Take the check receipt, staple that to the agreement, and keep it for the rest of your life.

It would help to know when you defaulted on this debt BTW.

Share this post


Link to post
Share on other sites

Another thing:  don't bank where you borrow.  If you do move the funds to a FDIC-insured account, do not choose a bank where you owe any debts.  Most banks have the right of offset, which means they can seize money from a savings or checking account to recover a debt you owe them.  For example, if you owe Citibank for a credit card debt, and then open a checking account at Citibank, they can clean out the account.  And they don't need a judgment to do this.

 

Share this post


Link to post
Share on other sites
9 hours ago, WhoCares1000 said:

You don't need a lawyer. Here is what you do. You call your first creditor and offer them 25 cents on the dollar to pay off the debt. When you make the offer, inform them that you came into a little bit of money but that you owe 4 times what you came into and with your financial situation, your only other alternative is to do a BK. If the first one does not accept, work the rest. Eventually they will come around. You might want to go as high as 33 cents to 50 cents on the dollar.

If they don't then buy a $14000 car and do a BK 7. I certainly qualify and can get a lawyer at that point. By the time you pay the lawyer and the taxes, registration, and insurance on the car (you can exempt up to $15000 in car equity plus $10000 wildcard exemption in NV), your creditors will be fighting over $2000 to settle $40000 rather than getting the $10000 you are offering. Don't threaten BK unless none are biting at the higher amount.

If they do bite on the offer (and I am sure at least some will bite if you lay bare what your financial situation is, they will see that you are a BK 7 waiting to happen without you having to state it), make sure to get it in writing that this settles the debt and DO NOT allow them electronic access to your bank account, instead send a money order or bank check to them. Take the check receipt, staple that to the agreement, and keep it for the rest of your life.

It would help to know when you defaulted on this debt BTW.

I'm confused by your response.  The OP only owes a maximum of $10,000.  No need to jump through any of the hoops of buying a $14,000 car, then claiming C7 with a $10,000 wildcard exemption if OP is going to have $13,000 left in excess of what can be exempted from the $37,000 life insurance payout.  Shouldn't OP just call them up, say she won $2500 playing Bingo, and ask them to settle the 10K debt in full for a one-time payment of $2500?  Even if nobody plays ball, OP should just maybe consider paying in full to be done with things, OR, just don't move the money from where it currently is.   Whatever increased interest rate OP will get over the current 1% will by moving to a higher-interest-rate savings account will NEVER add up to the amount she will pay to settle in any way shape or form.  

 

Sorry, I was confused because OP stated in first post she had a 10k credit card debt she was being contacted about, but then later downthread it morphed into 40k of debt to various lenders.    I think the discussion should also really focus on whether the chance for an increased APR will ever add up to any amount close to the best-case scenario of settling for 10k on 40k of debt.  It would probably take three lifetimes to realize 10k of interest on a 37k savings account, regardless of the interest rate.

Share this post


Link to post
Share on other sites

Thanks for the replies. As noted in my clarification above, I have more defaulted credit card debt than the life insurance payout, by far. I had said my debts totaled over $40,000, but with a defaulted dental loan, it is actually over $50,000

  • 10,000 US Bank
  • 20,000 US Bank
  • 10,000 Chase
  • 12,000 Dental loan
Quote

 

...the life insurance payout was $37,000. Over the last several years, I lived on, then defaulted on over $40,000 in credit card debt. My only income is $1005.00 per month in Social Security Disability. The only reason I am not homeless is I qualified for state subsidized housing.

 

 

 

So settling the debts will wipe out most or all of the payout, as all of them have been purchased by collection agencies.

 

Share this post


Link to post
Share on other sites
4 hours ago, briarpatch said:

So settling the debts will wipe out most or all of the payout, as all of them have been purchased by collection agencies.

No it won't. The fact the debts have been sold to JDBs means you will be more likely to settle these debts for significantly less than if they were still owned by the original creditors. 

Share this post


Link to post
Share on other sites
12 hours ago, briarpatch said:

Thanks for the replies. As noted in my clarification above, I have more defaulted credit card debt than the life insurance payout, by far. I had said my debts totaled over $40,000, but with a defaulted dental loan, it is actually over $50,000

  • 10,000 US Bank
  • 20,000 US Bank
  • 10,000 Chase
  • 12,000 Dental loan

So settling the debts will wipe out most or all of the payout, as all of them have been purchased by collection agencies.

 

I am saying to use the entire payout and I am not saying to pay the debts in full. I am saying that you call them one by one, explain your situation, that you got a small settlement ($10,000 - $15,000) and that you would like to settle the debt for pennies on the dollar. If they hem and haw, just let them know that you have the option of bankruptcy which would wipe out the payout with legal fees and the exemption and they get nothing (don't start with that however).

Worse case scenario is that you end up doing a BK as I recommended and they get the entire $13,000 left over. Not only that but the trustee gets a cut of any amounts given to creditors so there is even less for them to accept than what you are offering.

Share this post


Link to post
Share on other sites

I would not try to settle with creditors or file bankruptcy.  The OP is disabled and living at the poverty level.  She needs every dollar she can hold on to.

I would keep the payout in a safe (from creditors) account, even if that means a non-FDIC insured account.  And wait until the debts are out of statute before moving the funds. 

Your decision, of course.  Others may choose differently, depending on their financial situation, comfort with risk, feeling a moral obligation to pay, etc.  You didn't choose to become disabled, so I don't think anyone should judge you for whatever decision you make..

Another thing to consider: settling with creditors will have tax consequences.  You will receive a Form 1099c for the remaining debt.

Share this post


Link to post
Share on other sites

First off, even is she received a 1099-C, she is insolvent for tax purposes so those taxes would be wiped out (and even if they were not, the deductions would be enough to wipe out the rest) so a 1099-C in the OPs case is a wash.

The creditors however can sue her and obtain judgements. There is no such thing as judgement proof. The term should be collection proof which the OP is without the insurance funds. I am not sure if any of these have a arbitration clause so that might be out the window. If the creditors do get a judgement, they can be renewed indefinitely in Nevada. In that case, the debts would never go out of statute and the creditors will be less willing to negotiate.

By following my strategy, the OP can get rid of these forever and move on what whatever funds are left.

Share this post


Link to post
Share on other sites

I spoke with lawyer at the local Legal Aid Society. Life insurance proceeds are "protected" from taxation and from creditors, period. This remains true if I move the funds around.

If a creditor goes after these funds, I will need to file a "claim of exemption," and present proof in court the funds are life insurance. A hassle, but I look at it as work that will pay well, so this info is a relief.

The Nevada statute of limitations on credit card debt is four years. This leaves $30,000 that has not expired. https://www.lendingtree.com/debt-relief/nevada/#DebtinNevadaAtaglance

I drive a 1990 Camry with 230,000 miles on it. I will be able to buy a newer car when this one dies. When my best friend/ex-husband made me the beneficiary of his employee life insurance (he took his own life), no doubt he was thinking of me somehow getting by without his occasional, much needed help with my car, etc. I know that he would not want me to use any of these funds to pay off debts.

Thanks.

Share this post


Link to post
Share on other sites

Something to remember: if things get hairy and you need bankruptcy protection, you can always file it then.  It's not something that has to be done right now.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.