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Bankruptcy – Exemptions – ‘Liquid Asset’ – Life Insurance – Cash Surrender Value

In re Wilde (Lawyers Weekly No. 003-014-12, 6 pp.) (Helen Elizabeth Burris, J.) 11-07777; B.S.C.

Holding: The cash surrender value of a life insurance policy is not a “liquid asset”; therefore, the debtor cannot claim the cash surrender value of his life insurance policy as an exemption under S.C. Code Ann. § 15-41-30(A)(5).

The trustee’s objection is sustained, and the debtor’s claimed exemption is disallowed.

Black’s Law Dictionary defines a “liquid asset” as “an asset that is readily convertible into cash, such as a marketable security, a note, or an account receivable.” Black’s defines a receivable as “an amount owed …” and the similar term “account receivable” is defined as “an account reflecting a balance owed by a debtor; a debt owed by a customer to an enterprise for goods or services.” Black’s also provides a specific definition for “cash surrender value,” defining it as “the amount of money payable when an insurance policy having cash value, such as a whole-life policy, is redeemed before maturity or death.” A receivable is an “amount owed”; however, cash surrender value is not an amount owed, but rather an amount redeemable to the insured only when the life insurance policy is terminated prior to maturity or death.

S.C. Code Ann. § 15-41-30(A)(5) enumerates assets that constitute exemptible “liquid assets.” The statutory language specifically includes “deposits, securities, notes, drafts, unpaid earnings not otherwise exempt, accrued vacation pay, refunds, prepayments, and other receivables.” Section 15-41-30(A)(5) does not specifically include an exemption for any cash surrender value for life insurance, and that asset does not easily fall within any of the enumerated categories. The exclusion of cash surrender value from the assets listed evidences an intent that § 15-41-30(A)(5) is inapplicable here.

Objection sustained; exemption disallowed.

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