HBA-ATS H.B. 1805 76(R)BILL ANALYSIS


Office of House Bill AnalysisH.B. 1805
By: Dunnam
Financial Institutions
10/5/1999
Enrolled



BACKGROUND AND PURPOSE 

Under federal law, a person filing for voluntary bankruptcy is entitled to
claim state law exemptions. The Texas Property Code authorizes a family to
exempt personal property from garnishment, attachment, execution, or other
seizure, subject to an aggregate monetary cap of $60,000 for a family and
$30,000 for a single adult.  Prior to the 76th Legislature, the present
value of any life insurance policy to the extent that a member of the
family of the insured or a dependent of a single insured adult claiming the
exemption is a beneficiary of the policy was included within the list of
personal property exemptions under the Property Code. 

The Texas Insurance Code also contains a provision concerning the exemption
of life insurance. Among other exemptions, the Insurance Code requires that
all money or benefits of any kind, including policy proceeds and cash
values, to be paid or rendered to the insured or any beneficiary, be fully
exempt from execution, attachment, garnishment, or other process and from
all demands in any bankruptcy proceeding of the insured or beneficiary.
Unlike the provisions of the Property Code, no monetary limitation exists
under the Insurance Code. 

The interplay between these two codes creates a statutory conflict.  It is
unclear whether the value of a life insurance policy is fully exempt under
the Insurance Code or included within the monetary caps under the Property
Code.  Some federal bankruptcy courts have held that the value of a life
insurance policy is fully exempt under the Insurance Code (e.g., In re
Young, 163 B.R. 286 (Bkrtcy. W.D. Tex. 1993)).  Other bankruptcy courts
have held that although the Insurance Code permits a person to exempt the
full amount of an insurance policy, in doing so the person exhausts the
personal property exemption under the Property Code if the value of the
policy exceeds the monetary cap (e.g., In re Bowes, 160 B.R. 290 (Bkrtcy.
N.D. Tex. 1993)).  H.B. 1805 deletes the reference to the present value of
any life insurance policy from the types of personal property eligible for
an exemption from garnishment, attachment, execution, or other seizure
under the Property Code.    

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 42.002(a), Property Code, to delete the present
value of any life insurance policy to the extent that a member of the
family of the insured or a dependent of a single insured adult claiming the
exemption is a beneficiary of the policy from the types of personal
property eligible for an exemption from garnishment, attachment, execution,
or other seizure, subject to an aggregate monetary cap of $60,000 for a
family and $30,000 for a single adult.  Makes a conforming change. 

SECTION 2.Emergency clause.
  Effective date: upon passage.