HBA-ATS C.S.H.B. 1805 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 1805 By: Dunnam Financial Institutions 4/11/1999 Committee Report (Substituted) 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. Included within the list of personal property exemptions under the Property Code is 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. 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)). C.S.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. 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. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 1805 modifies the original bill by deleting SECTION 2 of the original, which proposed the repeal of Section 7, Article 21.22 (Unlimited Exemption of Insurance Benefits and Certain Annuity Proceeds From Seizure Under Process), Insurance Code. Section 7, Article 21.22, specifies that the exemptions and protection from seizure under the Insurance Code are additional exemptions and protections to the exemptions from garnishment, attachment, execution, or other seizure provided by Chapter 42 (Personal Property), Property Code. C.S.H.B. 1805 modifies the original bill by redesignating SECTION 3 (emergency clause) of the original to SECTION 2.