Under federal bankruptcy regulations, you can protect (exempt) up $10,775 of a life insurance policy's cash value from surrender in a bankruptcy. In addition, married couples can double all the exemptions available under the federal bankruptcy code. However, federal bankruptcy law specifically allows each state to "opt out" of federal exemptions and set their own guidelines pertaining to the type and amount of assets that can be exempt from seizure by a bankruptcy trustee. Many states have chosen to opt out, and others allow you to choose between state or federal exemptions. As a result, no state is solely governed by the federal exemptions. For additional information and guidance about local bankruptcy rules, consult with an experienced bankruptcy attorney in your state of residence. You cannot take both federal and state exemptions; when filing for bankruptcy you have to choose one or the other.
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