Keeping life insurance and retirement accounts in Bankruptcy
The life insurance policies offered through employers are usually term policies with benefits payable only upon the insured’s death. Thus, the amounts of such life insurance policies are exempt and not subject to seizure in a bankruptcy. Anything else with a present cash-out value is a whole policy and may be a nonexempt asset. The good news is that amounts presently available in a retirement plan (pension or 401k) receive an unlimited federal exemption and cannot be seized to pay creditors. Your life insurance agent can inform you whether you in fact have a term or whole policy and because state law would also vary as to exempt amounts, definitely consult a qualified bankruptcy attorney in your jurisdiction as regards the exemptions you may receive for your accounts.
