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Bankruptcy

Frequently asked questions regarding bankruptcy related personal finance topics

Q: Can you refinance while in chapter 13 bankruptcy?

Yes - it is possible to refinance your mortgage while in chapter 13 bankruptcy. This form of bankruptcy requires a debtor to enter a debt repayment plan that is both approved and monitored by a bankruptcy court. In order to refinance, a debtor should have made at least 6 plan payments on time. Additionally, the debtor will need an approval from the bankruptcy trustee to refinance the mortgage.


Q: Does bankruptcy affect my term life insurance policy?

Bankruptcy does not affect a term life insurance policy. Unlike life insurance policies that have a savings/investment component, such as whole life, term life policies have no cash surrender value. The value of a term life policy is only realized on the death of the policyholder.


Q: Does bankruptcy affect my whole life insurance policy?

Whole life policies have what is called a cash surrender value, which is the amount of money an insurance company would redeem to a policyholder if the policy was canceled. Therefore, a whole life policy can be considered an asset. Every state has its own set of bankruptcy laws, some states do protect cash surrender value of whole life policies in case of bankruptcy, but you should always check with your local bankruptcy court to determine how the laws read in your area.