This money would be considered an asset. It is possible that Trustee would have a claim to at least a portion of it. Like any other asset you have what they call exemptions available. These allow you to keep property/ assets in varying types and amounts, which the Trustee cannot take. This can include some money in the bank. Also if you are married and filing jointly these amounts are doubled. You should meet with a local Bankruptcy attorney who can review your entire situation and properly advise you. Most offer free initial consultations.
I hope this helps. Good luck.
I suggest you repair the house first. If not the trustee will claim that amount as a cash asset with limited exemptions. Unless there is an urgent reason to file you should wait. Talk to a local bankruptcy attorney to discuss your specific issues.
Howard E. Knispel, Esq.
The above is a general answer and is not considered legal advice. You should contact an attorney before proceeding to take any legal action, signing any papers or upon service of a summons. Howard E. Knispel 631-864-7589
You raise some tactical questions. Generally, those funds would fit into your homestead exemption, but some trustees might argue it is not. So it is safer to wait until the funds are paid out to actually become part of the homestead, rather than just money in the bank. You need to talk to a bankruptcy attorney who is familiar with how the court in your jurisdiction looks at this issue. Be sure to list your potential claim against the insurer for the balance of what you think it should pay as an asset of your bankruptcy.