When you are in a financial strain, filing bankruptcy may be the best tool to relieve you from debts and provide a fresh start. There is a negative stigma that filing bankruptcy involves creditors taking all your personal property, especially your home and car. However, California bankruptcy laws allow you to maintain possession of certain types of personal property when you file for bankruptcy.
Below is a guide to the different exemptions you are allotted under the law when you file Chapter 7 bankruptcy.
What Is a Bankruptcy Exemption?
California bankruptcy laws provide for certain exemptions that allow you to keep certain types of property that would otherwise be sold to pay off your creditors. For instance, when you file Chapter 7, all of your property is liquidated by a bankruptcy trustee to pay creditors. However, the Chapter 7 Trustee is not allowed to sell any portion of your property that would not produce a benefit to the bankruptcy estate. In other words, if the value of your asset is less than the amount of the exemption, the trustee will allow you to keep that particular asset.
Thanks to California’s generous exemptions, approximately 95% of bankruptcies are “no asset” cases where no assets are sold, creditors receive nothing, and you are permitted to keep everything that you own.
California Residency is Required for Exemptions
In order for you to file bankruptcy in California, the first requirement is that you must have lived in the state continuously for a minimum of 2 years prior to the filing. If you lived in more than one state during the last 2 years and you plan to file bankruptcy in California, you should immediately speak with an experienced Central Valley bankruptcy attorney on how to file while maximizing your exemptions.
California Bankruptcy Exemptions: 703 v. 704
California bankruptcy laws provide for two separate sets of exemptions. However, as a debtor, you are only allowed to pick one set. One set is known as the “704 Exemptions.” This set is typically a better fit if you have substantial home equity. The “703 Exemptions” set allows for a “wildcard exemption,” which is generally a better fir if you do not own real property or have less equity in your home.
Common types of 704 exemptions include:
- Homestead – between $300,000 and $600,000
- Motor vehicle – up to $3,325
- Household furnishings, apparel, personal effects – if “ordinarily and reasonably necessary to, and personally used or procured for use” by the debtor
- Materials used for repair or improvement
- Jewelry, heirlooms, and works of art – up to $8,725
- Health aids and prosthetic & orthopedic appliances
- Items required for the trade, business, profession
- Public benefits
- Social security benefits
- Life insurance
Common types of 703 exemptions include:
- Homestead exemption – up to $29,275
- Motor vehicle – up to $5,850
- Household furnishings, good, miscellaneous – up to $725
- Jewelry – up to $1,750
- Health aids and prosthetics & orthopedic appliances
- Tools, book, implements of trade – up to $8,725
- Public benefits
- Life insurance
Call an Experienced Central Valley Bankruptcy Attorney
If you are considering Chapter 7 bankruptcy, it is in your best interest to consult with an experienced bankruptcy attorney to help you learn your legal rights and options, especially with respect to Chapter 7 bankruptcy.
For more information or to schedule a complimentary consultation with Central Valley bankruptcy attorney Gurjit Srai, please call 209-323-5558, or complete our online form.