{"id":1832,"date":"2019-07-17T13:07:07","date_gmt":"2019-07-17T13:07:07","guid":{"rendered":"https:\/\/recoverylawgroup.com\/?p=1832"},"modified":"2025-08-26T11:25:16","modified_gmt":"2025-08-26T11:25:16","slug":"chapter-7-bankruptcy-under-californias-bankruptcy-laws","status":"publish","type":"post","link":"https:\/\/recoverylawgroup.com\/staging_D\/chapter-7-bankruptcy-under-californias-bankruptcy-laws\/","title":{"rendered":"Which Property is Exempted in Chapter 7 Bankruptcy under California\u2019s Bankruptcy Laws?"},"content":{"rendered":"

While filing for bankruptcy is one of the ways to get ahead of the huge number of dues you have, people are often confused regarding what property they can keep. Since, effectively, bankruptcy is a method to allow people struggling with debt a chance to get a fresh financial start, federal and state exemptions are available in order to protect a bankruptcy filer\u2019s property. while most states allow people to choose between federal and state bankruptcy exemptions, Los Angeles based bankruptcy law firm Recovery Law Group<\/a>\u00a0inform that California does not do so. Any person who has lived in California for two years can choose from either of the 2 sets of the exemption provided by the state of California. In case, you shifted to California recently, your state of residence 180 days prior to shifting will determine which bankruptcy laws to follow.<\/p>\n

Consumers can file bankruptcy under either Chapter 7 or Chapter 13. Your entire property becomes part of the bankruptcy estate which is evaluated by a bankruptcy trustee. The assets are sorted (based on which exemption set you have chosen) into the exempt property and non-exempt property. your non-exempt property is used to pay off your creditors in case of Chapter 7, while your monthly repayment plan is devised using the amount of non-exempt property you have. Exemption laws are designed in a way to leave some assets with the debtor for them to make a fresh start. Any exemption in an asset is taken in terms of equity or ownership of the person. Equity is calculated as the amount to be given to the owner if the asset is sold after paying off liens.<\/p>\n

Bankruptcy exemption system in California<\/strong><\/p>\n

Needless to add, bankruptcy with several laws and confusing paperwork can be quite confusing for a person already struggling with financial woes. Connecting with specialized bankruptcy lawyers at 888-297-6023 and discussing their case can make them aware of the various exemptions which can help them during bankruptcy proceedings. The state of California has to bankruptcy exemption systems. A debtor can choose either of the two depending on what assets they want to save.<\/p>\n

System 1 of California Bankruptcy Exemptions<\/strong><\/p>\n

Most common system of exemption used, it is also known as \u201cHomestead Exemption\u201d because it protects the equity in the home. A list of assets exempted under this is provided by the California Code of Civil Procedure (C.C.P. \u00a7 704). Married couples can double some of the exemptions if they file jointly, however, there is a permissible limit to the exemption up to a dollar amount. The exemptions in this system include:<\/p>\n

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  1. Homestead:<\/strong>Equity in home up to $75,000 for a single person (under 65 years of age); equity in a home for a married couple of up to $100,000; and equity in a home up to $175,000 for those over 65,\u00a0disabled, or low-income persons over the age of 55.<\/li>\n
  2. Motor Vehicle:<\/strong>Up to $3,050 equity may be applied to motor vehicles.<\/li>\n
  3. Insurance:<\/strong>Unmatured life insurance policies are totally exempt, however, the loan value of these policies is exempt only to $12,800.<\/li>\n
  4. Health Aids:<\/strong>Those which are necessary for the debtor or his or her spouse or dependent to work or keep good health, including prosthetic and orthopedic appliances, are completely exempt.<\/li>\n
  5. Building Materials or Home Maintenance:<\/strong>Up to $3,200 in materials that, in good faith, are about to be applied to the repair or improvement of a residence.<\/li>\n
  6. Jewelry<\/strong>, Heirlooms, and Art:<\/strong>Up to $8,000 (even in case of joint bankruptcy).<\/li>\n
  7. Food, Clothing, Appliances, and Furnishings:<\/strong>Items which are ordinarily and reasonably essential, and personally used by, the debtor or members of his or her family are exempt, however, any item having \u201cextraordinary value,\u201d is not exempted.<\/li>\n
  8. Wages:<\/strong>Up to 75% of wages earned 30 days prior to filing for bankruptcy.<\/li>\n
  9. Pensions:<\/strong>Public and private retirement accounts\u00a0are exempt.<\/li>\n
  10. Public Benefits:<\/strong>Unemployment and disability benefits, public assistance benefits, workers\u2019 compensation, and student financial aid are completely exempt.<\/li>\n
  11. Tools of Trade:<\/strong>Various tools, instruments, implements, materials, furnishings, uniforms, books, equipment, one commercial motor vehicle, one vessel, and other personal property used in a trade or business are exempt to $8,000. In a joint bankruptcy, if both spouses are in the same occupation, the limit is $15,975. (The commercial motor vehicle is limited to $4,850, or $9,700 if both spouses are in the same occupation.)<\/li>\n<\/ol>\n

    System 2 of California Bankruptcy Exemptions<\/strong><\/p>\n

    For people who have less home equity, this is the better option. This exemption system is also known as \u201cWildcard Exemption\u201d or \u201c703 System\u201d (C.C.P. \u00a7 703). With this set of exemptions, the miscellaneous property can be protected up to a specified dollar amount. This system can be used to protect property only in bankruptcy. It is also important to note that doubling is not allowed in this system. exemptions included in this case are:<\/p>\n

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    1. Homestead:<\/strong>The debtor\u2019s equity in his or her residence up to $26,800.<\/li>\n
    2. Miscellaneous Property (\u201cWildcard Exemption\u201d):<\/strong>This exemption can be used for any property up to a limit of $1,425, plus any unused amount from the homestead exemption (for a total of $28,225 if the homestead exemption is not used at all).<\/li>\n
    3. Motor Vehicles:<\/strong>Up to $5,350 total may be applied to one or more motor vehicles.<\/li>\n
    4. Jewelry:<\/strong>Up to $1,600 for jewelry used primarily for personal, family, or household use.<\/li>\n
    5. Insurance:\u00a0All u<\/strong>nmatured life insurance contract owned by the debtor is totally exempt, except for a credit life insurance contract. However, any accrued dividend or interest under, or loan value of, an unmatured life insurance contract is exempt only up to $14,325.<\/li>\n
    6. Pensions:<\/strong>Tax-exempt\u00a0retirement savings accounts (e.g., 401(k)s, 403(b)s) are completely exempt under federal non-bankruptcy law (i.e., notwithstanding the unavailability of federal bankruptcy exemptions in California); IRAs and Roth IRAs are exempt under federal non-bankruptcy law up to $1,283,025.<\/li>\n
    7. Public Benefits:<\/strong>Disability and unemployment benefits, veterans\u2019 benefits, workers\u2019 compensation, aid to elderly or disabled, and crime victims\u2019 reparations are totally exempt.<\/li>\n
    8. Tools of Trade:<\/strong>Implements, professional books, or tools of the trade are exempt up to $8,000.<\/li>\n<\/ol>\n

      To a layman, there might not be much difference in the two exemption sets, however, a skilled bankruptcy lawyer California<\/a> can suggest which one is going to help save most of your assets when you file for bankruptcy.<\/p>\n

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