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


Office of House Bill AnalysisH.B. 1805
By: Dunnam
Financial Institutions
3/21/1999
Introduced



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)).  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.  In
addition, this bill repeals a provision of the Insurance Code that
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 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.  Repealer:  Section 7, Article 21.22, Insurance Code (Provides
that the exemptions and protection from seizure under Article 21.22
(Unlimited Exemption of Insurance Benefits and Certain Annuity Proceeds
From Seizure Under Process), 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). 
 
SECTION 3.Emergency clause.
  Effective date: upon passage.