When you file bankruptcy, there are numerous categories of Exemptions that people can use to protect their assets. One of the categories concerns life insurance.
List your term life insurance policy in your bankruptcy papers and claim any available exemption. Listing a policy does not automatically make it exempt. The applicable exemption rules distinguish the insurance contract from any cash value or death-benefit payments. Sources: 11 U.S.C. § 522(d)(7)–(8), (11)(C), (l); U.S. Bankruptcy Court: Exemptions.
Washington and federal laws provide different life insurance protections. Whether a particular policy, cash value or payment is protected depends on the applicable exemption and its conditions. Sources: RCW 48.18.410; RCW 48.18.420; 11 U.S.C. § 522.
Washington law provides protections for the following, subject to each statute’s conditions and exceptions:
If you use the federal bankruptcy exemptions, an unmatured life insurance contract you own can be protected, except credit life insurance. As of October 24, 2026, the exemption for qualifying accrued dividends, interest and loan value in unmatured policies you own is $16,850 in total for cases commenced on or after April 1, 2025, subject to statutory conditions. The insured must be you or an individual of whom you are a dependent.
Life insurance death-benefit payments have a different rule: you must have been the insured’s dependent at death, and the exemption is limited to what is reasonably necessary to support you and your dependents. For these federal exemptions, “dependent” includes a spouse even without actual financial dependence. Federal exemptions also cover the right to receive disability, illness or unemployment benefits. Sources: 11 U.S.C. § 522(a)(1), (d)(7)–(8), (10)(C), (11)(C); Judicial Conference: 2025 dollar adjustments.
The $12,250 figure in the original November 2014 article reflected the federal amount then in effect; federal exemption amounts are adjusted periodically. Sources: 11 U.S.C. § 522: 2013 and 2016 adjustment history.
Which exemption system you can use depends on federal eligibility and domicile rules, not simply where you file. If Washington exemption law applies to your case, you can generally choose the federal bankruptcy exemptions or the Washington exemptions together with applicable federal nonbankruptcy exemptions. You cannot mix the two systems item by item. Sources: 11 U.S.C. § 522(b)(1)–(3); In re Anderson: official Ninth Circuit opinion, appendix p. 5.
Over the past 34 years, the Law Offices of Christopher A. Benson has helped over 2,300 of Washington clients take control of their financial situation. We can review whether bankruptcy may help stop your garnishment and address your debts through a repayment plan. Sources: 11 U.S.C. § 362(a)–(d); U.S. Courts: Chapter 13 bankruptcy. If money has already been garnished, recovery may be possible in some cases, depending on the timing of the transfers, applicable exemptions and other legal requirements. A refund is not automatic or guaranteed. Sources: 11 U.S.C. § 547(b)–(c), (e)–(g); 11 U.S.C. § 522(g)–(i); 11 U.S.C. § 550(a). But you have to act quickly–call (253) 815-6940 for your free consultation, or email us today. Evening and weekend appointments available.
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