Expert: Norma Duenas - California Bankruptcy Attorney - 5/26/2010

Question
My Mother in law is currently going through a nasty divorce and filling chapter 7 with her soon to be Ex. She is completely disabled and on SSI. Her home was robbed last month and she received a insurance check for her stolen items. Her almost ex husband notified the bankruptcy people and his bankruptcy lawyer told her if she didn't give up the money they would make her sell her car. I read on the federal courts website that  her SSI doesn't count as  income and money for lost items dosent either. Can they do this to her? It makes no sense to me. Please help!

Answer
If the trustee is asking for the money it doesn't necessarily mean that he is counting it as income but may be arguing that it is not a protected asset in your bankruptcy. There are several options you can possibly discuss with her attorney to best protect the insurance proceeds from the stolen items. I would argue with the trustee that the insurance proceeds are exempt because they stem from property that was exempt in the bankruptcy (assuming it was exempt). If trustee objects to the exemption of the insurance proceeds then you can litigate the issue or try to seek to settle with the trustee for a specified amount of the insurance proceeds. Also you can try also to consider a Chapter 13 bankruptcy conversion in which you pay creditors from the insurance proceeds over a period of time. It may reduce what you end up paying out of the proceeds based on which creditors file a claim in the Chapter 13 bankruptcy. If you need further information on Chapter 7 bankruptcy you can go to http://www.socaladvocates.com/chapter7 or if you need further assistance you can contact me at norma@socaladvocates.com