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Will a creditor accept a life insurance policy in lieu of debt?

Santa Rosa, CA |

I am being sued by a creditor and don't have the funds to settle. I do have an option to go chapter 7. I have a life insurance policy that is over the amount owed that is payable until I am 89 years old. I am now 60 years old. Would the creditor accept being a beneficiary on this policy as a settlement of debt? Is it worth while to approach the creditor with this kind of arrangement?

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Attorney answers 4


I don't believe that a creditor will accept a life insurance policy. Your best bet is to consult with a bankruptcy attorney as to your options. Good luck.

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Get a free consult from a bankruptcy attorney to see what all your options really are.

The way I see it, maybe you can

1. file bk and exempt this life insurance, paying that creditor who is suing you nothing.
2. settle the debt for pennies on the dollar. Maybe with a repayment plan, maybe using that life insurance policy.

Unless it's a private creditor and you have a relationship with them, they probably don't want this life insurance policy. On the other hand, you might be able to find a 3rd party who is willing to take it over for cash now. It all depens on the deal you have with your insurance.

The above is general legal and business analysis. It is not "legal advise" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also terms and conditions item 9, incorporated as if it was reprinted here. Please visit my web site: for more information about my services.


If this is your only debt, I understand why you are reluctant to file bankruptcy. But a bankruptcy attorney can advise you if doing nothing might be an okay way to resolve this legal problem. Unfortunately, there aren't enough characters to pose a question & provide all of the necessary information. There are some fine bankruptcy attorneys in your community. Look for additional information about them by using the "Find a Lawyer" search tool here on Avvo. Hope this perspective helps!


As often happens in answers here - it depends... I look to see what you have now, and especially what you want to have when you are 65 or 70. Be careful what you do. I do a little bankruptcy, but I would advise you to see another colleague whom I would refer you to in Santa Rosa, Call me.. best Michael 707-529-5219