Can a credit card company take my life insurance?

by D.
(USA)

Can a credit card company take the cash value of my life insurance policy if I can't pay them?

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Jun 14, 2009
Life insurance to pay debts
by: Gerri

I know this must be stressful, but I wouldn't panic. First of all, if you've read Debt Collection Answers, you'll know that generally creditors and debt collectors must first take you to court and obtain a judgment before they can go after your property to pay an unsecured debts. You'll have notice if this happens and that will give you time to prepare.

Secondly, every state has property exemptions -- or property that is protected from creditors even if you file for bankruptcy. Usually various amounts of the cash value in a life insurance are exempt, but it varies from state to state.

Even then, we think the likelihood is fairly remote. We certainly haven't heard of a credit card company going after cash value life insurance to collect.

One thing you may want to consider, depending on your financial circumstances, is to take some of that money and use it to settle the debt for less than the full value. There are risks to that strategy, though, which my coauthors and I describe in our book Reduce Debt, Reduce Stress - so proceed with caution. (In the meantime, you may find that book helpful for figuring out a strategy for dealing with your debt.)

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