CS Professional · Insolvency and Bankruptcy - Law and Practice · Bankruptcy for Individuals and Partnership Firms
Vikram Joshi, a bankrupt, owns a single unencumbered dwelling unit of a prescribed value, an unencumbered life insurance policy in his spouse's name, and a car mortgaged to a bank. The bankruptcy trustee is identifying the estate. Which statement is correct about excluded assets?
The unencumbered life insurance policy in the spouse's name is an excluded asset. The Code excludes unencumbered life insurance policies or pension plans taken in the name of the debtor or his immediate family, while the mortgaged car is encumbered and so not excluded.
- AThe mortgaged car is an excluded asset as a vehicle for personal use
- BThe unencumbered life insurance policy in the spouse's name is an excluded assetCorrect
- COnly the dwelling unit is excluded and insurance policies always vest in the trustee
- DNothing is excluded once a bankruptcy order is passed
Explanation
Excluded assets include any unencumbered life insurance policy or pension plan taken in the name of the debtor or his immediate family, and a spouse is immediate family. The car is mortgaged, so it is not unencumbered and does not qualify. The dwelling unit is also excluded, so the 'only' option is wrong.
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