A Guide to California Bankruptcy Exemptions
Facing debt can be a challenging journey, so if you are considering bankruptcy, understanding the California bankruptcy exemptions is important so you can protect your real and personal property.
Whether you’re facing overwhelming debts or seeking a fresh financial start, bankruptcy exemptions play a crucial role in safeguarding your essential assets
In this blog post, I’ll discuss your options with California’s 704 and 703 exemptions, helping you make informed decisions.
Filing for Bankruptcy in California
Before you file for bankruptcy in California, the Bankruptcy Code (Bankruptcy Abuse Prevention and Consumer Protection Act, also known as BAPCPA) requires that you satisfy the residency requirements.
Regardless of what state a debtor files in, there are two separate residency dates to be aware of. At a minimum, you must have resided in California for 91 days out of 180 days. You will use the state’s exemptions if you have lived in California for 730 days or more. If you haven’t, you must use the bankruptcy exemptions from the state you resided in previously.
Finally, the Bankruptcy Code in Section 522, requires that you have owned the home a total of 1,215 days for California’s homestead exemption to apply.
California Bankruptcy Exemptions
If you’re considering filing for bankruptcy in California, one of the first steps is to become familiar with the state’s bankruptcy exemptions. If you file for Chapter 7 or Chapter 13 bankruptcy, bankruptcy exemptions protect your assets. While people generally believe they lose all their assets when bankruptcy is filed, that’s not the case. So, let’s review the California bankruptcy exemptions to understand the process better.
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California is unique when it comes to filing for bankruptcy because there are two sets of exemptions. Generally, statutes will categorize assets and provide x amount of protection. You must choose one or the other. The exemptions can’t be combined.
The first set of exemptions is known as the 704 exemptions. The other set of exemptions is known as the 703 exemptions.
Protecting Your Home’s Equity
Each state offers a homestead exemption to protect your home. This is different from the homestead exemption when it comes to property taxes. The homestead exemption in bankruptcy is to protect the equity in your home.
Because property values in California vary greatly depending on the county, under the first set of exemptions (704 exemptions), the homestead exemption ranges from $300,000 to $600,000. The second set of exemptions (703 exemptions) is lower as it ranges from $29,275 to $175,000.
So, if you have more equity in your home, it is usually better to use the 704 exemptions. The 703 exemptions can be used if you have minimal home equity or don’t own a home.
California 704 exemptions
In California, the 704 exemptions provide various levels of protection, which vary depending on the situation. The exemption allows for up to $75,000 in equity for single individuals. Families where at least one member is not interested in the homestead are entitled to an exemption of $100,000.
Those who are 65 or older or who have a physical or mental disability can exempt up to $175,000. Individuals at risk of foreclosure are also eligible for an exemption of $175,000. The California 703 Exemptions protect up to $26,800 in equity.
Motor Vehicle Exemption
Car owners can exempt up to $3,050 in equity thanks to the motor vehicle exemption under the 704 exemptions. The 703 exemptions increase the equity protected in cars up to $7,500.
Personal Property Exemptions
Personal property exemptions also vary depending on which set of exemptions are chosen. The 704 exemptions allow an exemption of $1,800 per item, whereas 703 exemptions offer $800 per item.
Because of California’s complicated and unique system of picking from two different types of exemptions, I consider it imperative that bankruptcy be filed only with the assistance of a bankruptcy lawyer.
The California Bankruptcy Court System
The California Bankruptcy Court System is divided into four districts: Northern, Southern, Central, and Eastern. Each district can be obtained via the links listed below, along with the counties that are part of that district.
Contact information for the bankruptcy trustees in California can be seen via this link.
Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. For paralegals and students buying single copies, you can do so via Amazon books. To access my YouTube channel, click this link.
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Please note the information on this site does not constitute legal advice and should be considered for informational purposes only.
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