Life insurance proceeds in a bankruptcy
I have received a life insurance payout after my husband passed. We were both in active bankruptcy at the time.
I received a notice from Sunlife that a policy existed that my husband had taken out. The Face value just over 30k. On that policy, I was given the choice to pick a lump sum payment or a monthly annuity.
I was advised to take the annuity because the lump sum would be considered an asset. I don’t understand why my trustee is trying to take all of the funds. Is this legal? I’m not trying not to pay. I just don’t see how they get to decide how.
Are they are within their right to do so. I just want verification.
According to the Office of the Superintendent of Bankruptcy the insurance proceeds belong to the trustee.
Directive #25R states (in part):
Although insurance legislation varies from one province to another, generally the trustee is entitled to realize the proceeds of a life insurance policy if payable to the estate of the bankrupt.”
Earl Sands, Licensed Insolvency Trustee