Expert: Terry Leeders - 12/19/2007

Question
I am filing Bankruptcy jointly with my soon to be ex after year end. I have a VAR life insurance policy that has about 7500 cash value. My car has 250,000 miles on it and is dying quickly.
Can I cash out the VAR and buy a new car outright (no loan), before I file, without repercussions? If I wait until I file, wont they take the cash from the VAR as an asset? This will leave me with a failing car or the prospect of finding financing for a new car after I file BK.

Thanks

Answer
You should meet with your lawyer to do some exemption planning. Each state is different.  Some insurance may be protected 100%, but when you convert it to cash, and put it into a vehicle, you then lose that exemption and need to use a vehicle exemption.  Every state is different, so I would definitely seek advice from your lawyer before making any moves.