Under what circumstances are life insurance policies exempt in bankruptcy? Can the exemption ever be forfeited? These were some of the questions considered by the 10th Circuit Bankruptcy Appellate Panel in the case of In Re Larry Erickson and Betty Moore, filed in August 2011 (KS-11-005). Life insurance proceeds are normally exempt in bankruptcy provided certain conditions are met, but this case had an unusual set of facts.
Husband and wife Larry J. Erickson and Betty L. Moore filed a petition for Chapter 7 relief on March 30, 2010. At the time the petition was filed, Erickson owned several insurance policies on his life with respect to which Moore was the designated beneficiary. Debtors neither scheduled the life insurance policies as assets, nor claimed them as exempt.