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| Is the cash value of an annuity free from creditors if the owner files for bankruptcy? |
Bankruptcy is one of the
few situations when state law supersedes federal law, so
whether your cash value is protected from your creditors
depends on the laws of your state.
There are provisions in federal law that can protect
certain types of property from creditors in bankruptcy
cases, but Congress gave each state the right to develop
its own rules or to decide that the federal rules are
applicable.
If federal bankruptcy law is applicable in your state, you
can "exempt" up to $8,625 of accumulated cash value from
the assets that creditors can claim. Furthermore, if you
don't have or don't need the full exemption for real
estate, you may also be able to protect another $8,000 of
cash value from your creditors under federal bankruptcy
rules. |
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