The bankruptcy case called In re Collins from 2002, was after the debtor husband's death, a debtor wife cleaned exemption of $50,172 in life insurance proceeds. The trustee claimed that the amount exceeded the exemption limit, something a Chester County bankruptcy lawyer would object to. The court had determined the wife's reasonable needs. She had a high school education and had worked as a court clerk for 13 years. She and her children, ages four and 10, were in good health and had no special needs.
In addition to nominal exemptions in other assets, she exempted interest in a retirement plan, a 401(k) plan, other life insurance proceeds and certificates of deposit having an aggregate value of $31,997. She had a monthly deficit on her schedules I & J of $352 for basic subsistence requirements, however, and exemptions were designed to avoid such a situation. Her age was not in evidence, but if she was young, she would incur taxes and penalties and making early withdrawals from her pension and 401(k) plans might reduce the amounts by 20% or more. In the absence of penalties, the total value of the uncontested exempt assets was insufficient for her entire term of retirement. Thus, all of the insurance proceeds were reasonably necessary for the subsistence of herself and her minor children.