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California Bankruptcy Exemptions

If you are dealing with overwhelming debt, you are likely looking for options to find financial relief. Although bankruptcy is a great option to get debt relief, it can be daunting because many people lose their assets during the bankruptcy process. What many people don’t know is that many assets are protected during bankruptcy. California has bankruptcy exemptions that allow filers to keep some of their assets while seeking aid. Our Irvine bankruptcy attorneys explain which assets qualify for protection under California bankruptcy exemptions.

If you are dealing with overwhelming debt, contact our Irvine bankruptcy attorneys today at (949) 570-5025 to schedule a consultation!

How Do Bankruptcy Exemptions

Regardless of whether you file for Chapter 7 or Chapter 13 bankruptcy, you can protect your assets with bankruptcy exemptions. However, it is important to note that each chapter treats nonexempt property differently. For example, Chapter 7 bankruptcy may require you to sell non-exempt property and distribute the proceeds to creditors. Whereas, Chapter 13 bankruptcy may allow you to keep all the property that you own you must pay the nonexempt property with your disposable income.

California Bankruptcy Exemption System 1 (704 Exemptions)

Below are the exemptions commonly used by California bankruptcy filers.

Homestead Exemption

The homestead exemption protects a certain amount of equity in your primary residence. This means that you can only protect equity from the property you reside in when you file for bankruptcy.

Motor Vehicle Exemption

The California bankruptcy exemption also allows bankruptcy filers to keep their motorcycle, as long as the vehicle value is a reasonable amount. You can keep one vehicle as long as it is not a luxury vehicle. This includes your car, truck, motorcycle, or another vehicle.

Personal Property Exemption

You are also allowed to keep personal property, such as:

  • Health aids
  • Cemetery and burial plot
  • Household items and personal effects
  • Building materials to repair or improve home up to $3,500
  • Jewelry, heirlooms, and work of art up to $8,725
  • Bank deposits to $1,788 or to the extent needed for support
  • Recoveries from wrongful death or personal injury cases

Wages Exemption

You will also be allowed to keep 75 percent of your wages earned before filing for bankruptcy (30 days).

Retirement & Pensions

You can keep most retirement, pensions, and public benefit accounts, such as:

  • Tax-exempt retirement accounts, such as 401(k)s, 403(b)s, profit-sharing, and money purchase plans, SEP, and more
  • IRAS and Roth IRAs (limits apply)
  • Public and private retirement benefits
  • And more

California Bankruptcy Exemption System 2 (703 Exemptions)

California bankruptcy exemptions also have a system 2 which allows you to protect certain property that only applies in bankruptcy. This means that you can’t use system 2 to protect property against creditors outside of bankruptcy. This system is not traditionally used in certain California bankruptcy courts, but you can talk to your attorney to determine if you can use it in your case. An attorney can help you determine which bankruptcy exemption option is best for your situation.

The California bankruptcy exemption system 2 is more limited in areas like retirement, pensions, and public benefits. However, it does offer more protection for motor vehicles and personal property. System 2 exemptions also provide filers with a wildcard. The wildcard will allow the filer to use $1,550 plus any unused amount of burial or homestead exemption toward their exemptions.

If you have questions about how California bankruptcy exemptions would apply to your unique case, contact our Irvine bankruptcy attorneys today at (949) 570-5025 to schedule a consultation!