Posted on Fri, Nov. 6, 2009
Dear Harry: I have a universal life insurance policy that will pay my heirs $100,000 "if and when" I pass away. I owe $21,000 on a credit card, and the bank has retained a lawyer to try to collect this debt. He said that he is in the process of getting a judgment against me. Can this lawyer use a judgment to interfere with the policy so my beneficiaries will be hurt? Can he attach the cash value I have in the policy? If so, I can borrow the cash value first to buy additional insurance under the policy provisions, but that will only add to my debt burden. Negotiating with this creditor is not an option. I am 71 and retired. I have no assets other than a car (worth about $2,000), and I live on SS and a minuscule pension.
What Harry says: Just what do you mean by "if" you pass away? I can guarantee it! In any event, the life- insurance industry has done a superb job in protecting policyholders from creditors. You have absolutely no need to worry about anything as long as your policy proceeds go to named beneficiaries and not your estate. However, if you get the cash value (even if it's borrowed), it then becomes subject to your creditor's claim. I fail to understand why negotiating is not an option. You seem to be trying to get out of a legitimate debt. And remember, any creditor can go after any bank accounts and savings that you have elsewhere.
Write Harry Gross c/o the Daily News, 400 N. Broad St., Philadelphia, PA 19130. Harry urges all his readers to give blood - contact the American Red Cross at 800-GIVE LIFE.
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