In re Narvais was decided in the United States Bankruptcy Court For The District Of Wyoming on October 21, 2011. In Narvais the Debtor included an expense of $158.60 for a the cost of a term life insurance policy which he did not presently have when the case was filed. Originally, Debtor included on Form 22C an expense in the amount of $250.00 for a whole life insurance policy.
In denying the Debtor’s allowance for the term life insurance, the court noted in this Chapter 13 bankruptcy case that this was not an actual expense for life insurance but rather was merely an estimated cost to the debtor for life insurance. The Court likewise stated that the Bankruptcy Code was considered to be a “Other Necessary Expense” under the IRC Collection Financial Standards.
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However, in this Chapter 13 case the Court found that “whole life policies are savings devices and not necessary for an individual’s basic living expenses and that the ‘actual monthly expenses’ language of 11 U.S.C. 707(b)(2) applied. Furthermore, the Court pointed out that the disallowing and expense on Form 22C for a whole life insurance policy would increase this Debtor’s disposable income and that an increased disposable income would make more funds available to pay Debtor’s creditors.
It is important to note that whether a debtor files a Chapter 7 bankruptcy or a Chapter 13 bankruptcy a debtor could deduct the cost of a term life insurance policy on Form 22C as a necessary expense. A term life insurance policy is pure insurance and does not build cash value. If you have questions about Chapter 13 bankruptcy in Wyoming or Chapter 7 bankruptcy in Wyoming, please feel free to visit our state pages.