If she received the life insurance proceeds prior to filing and she spent the money prior to filing then she could potentially be okay. However, the issue is how soon before filing did she receive it, how much did she receive and what did she do with it?

Answer Applies to: California
Replied: 9/1/2011

Disclaimer: The response above does not form an attorney-client relationship. This answer may or may not apply to you and should not be relied upon as legal advice. LawQA does not make any representation as to the expertise or qualifications of this attorney. This attorney may or may not be admitted to state bar of your state.

Life insurance proceeds received prior to bankruptcy are assets that must be disclosed. There are certain exemptions that can be claimed. In some circumstances it would be advisable to file chapter 13 instead of chapter 7. Consult an attorney as to how to protect your inheritance.

Answer Applies to: California
Replied: 9/1/2011

Disclaimer: The response above does not form an attorney-client relationship. This answer may or may not apply to you and should not be relied upon as legal advice. LawQA does not make any representation as to the expertise or qualifications of this attorney. This attorney may or may not be admitted to state bar of your state.

You do not say how much she received or how she spent the money. Those are important facts needed to answer your question. If, for example, she received $100,000 just before bankruptcy and took a cruise around the world instead of paying debts then her case might be denied on the basis of bad faith and/or abuse. Bankruptcy is for the unfortunate, honest debtor who cannot trully afford to pay debts. Whether the money came from a life insurance policy or she found it in a bag on her porch or she won a lotto ticket is irrelevant in her case. If she can't explain what happened to the money then the trustee will suspect that it is under her mattress and she is hiding it. This might be an additional issue in her case that might come up, particularly if the amount she received is large considering her standard of living.

Answer Applies to: California
Replied: 9/1/2011

Disclaimer: The response above does not form an attorney-client relationship. This answer may or may not apply to you and should not be relied upon as legal advice. LawQA does not make any representation as to the expertise or qualifications of this attorney. This attorney may or may not be admitted to state bar of your state.

You have to reveal all source of income for the past 3 years in bankruptcy . If it wasn't revealed, that might be the problem. Who she paid could be part of the problem.

Answer Applies to: California
Replied: 8/31/2011

Disclaimer: The response above does not form an attorney-client relationship. This answer may or may not apply to you and should not be relied upon as legal advice. LawQA does not make any representation as to the expertise or qualifications of this attorney. This attorney may or may not be admitted to state bar of your state.