Under the Insurance Act of Ontario if your insurance policy’s beneficiary is your spouse, child, parent, or grand child then the value of the policy is exempt from seizure and unaffected by making an assignment in bankruptcy.
Term life insurance policies, meaning those that have no value unless the insured individual becomes deceased, are always unaffected by the bankruptcy process.
There are two caveats.
1) If an un-discharged bankrupt receives life insurance proceeds before completing their bankruptcy process then those proceeds will be seized by the Trustee in Bankruptcy and used for the general benefit of creditors to the extent of the bankrupt’s debt.
2) If your policy’s beneficiary is other than your spouse, child, parent, or grand-child, and your policy has a cash surrender value, then that value must be surrendered to your Trustee if you make an assignment in bankruptcy.
Filing a consumer proposal will never impact your insurance policies as no assets or earnings are surrendered when filing a Consumer Proposal.
If you have questions about your insurance policies and bankruptcy then drop us a line. We’re always happy to hear from you and will take the time to answer your questions so that you can get relief and make the best decisions possible.