EXEMPT PROPERTY

When people file for bankruptcy, the property they are allowed to keep is known as "exempt property”" While bankruptcy is a product of Federal law, Federal law allows the States to create their own exemption schemes. The States can create their own exemptions, adopt Federal exemptions, or elect to use both, allowing debtors to choose between their State's exemptions and Federal ones.

Here in California, Federal exemptions are generally not allowed (exceptions discussed below). California has created two separate sets of exemptions and debtors are, with limited exception, allowed to choose the exemption scheme which is most beneficial to them. Most individual debtors keep everything they own, but oftentimes the key to success in doing so is to choose the right exemption scheme (not to mention listing and valuing your property correctly).

Below is a general summary of the two exemption schemes provided for under the California Code of Civil Procedure. I call the first set the "Homestead Scheme" because it allows, in certain cases, debtors the ability to protect up to $175,000.00 in equity in their residence (homestead). Individuals with significant equity in their home will probably need to avail themselves of this scheme. Under certain circumstances, debtors may also benefit using this scheme even if they do not own a home.

Most individuals who either do not own a home, or have little to no equity in their homes, will probably benefit most from what I call the" Wildcard Exemption Scheme". I call it the “Wildcard” because, under certain circumstances, and in addition to the many other exemptions also provided, debtors will get a wildcard exemption which they can use to protect any property. An exemption which, by itself, can be worth as much as $23,250.00.

 

SET #1 HOMESTEAD EXEMPTION SCHEME

 

Debtors can generally keep:

Homestead - Real or personal property occupied at time of filing for bankruptcy, including mobile home, boat, stock cooperative, community apartment, planned development, or condominium, up to the following limits: $75,000 if single and not disabled; $100,000 if family and no other member has homestead; $175,000 if 65 or older or if physically or mentally disabled; $175,000 if creditors are seeking to force sale of your home and you are either (a) 55 or older, single. and earn under $15,000 per year, or (b) 55 or older, married, and earn under $20,000 per year. Sale proceeds are exempt for up to 6 months after sale.

Motor vehicle or auto insurance if vehicle lost, destroyed, or damaged up to $2,725.

Reasonable and ordinary food, clothing, appliances, and furnishings.

Building materials to repair or improve home up to $2,875.

Jewelry, heirlooms, and art up to $7,175 total.

All necessary health aids.

Bank deposits from Social Security Administration up to $2,875 for single payee ($4,300 for husband and wife payees) and unlimited if funds are not commingled.

Personal injury causes of action and wrongful death causes of action. Wrongful death and personal injury recoveries that are needed for support.

Burial plot.

75% of wages paid within 30 days prior to filing bankruptcy.

Public Pension Benefits.

Private Pension Benefits.

11 U.S.C. § 522 - Tax exempt retirement accounts (including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans).

Unemployment benefits and union benefits due to labor dispute.

Worker's compensation.

Financial aid to students.

Tools, implements, materials, books, uniforms, instruments, one commercial vehicle, equipment, and furnishings up to $7,175 total, or up to $14,350 if used by both spouses in the same occupation. Commercial vehicle up to $4,850, or $9,700 if used by both spouses in the same occupation.

Matured life insurance benefits needed for support of unlimited value, or unmatured life insurance policy up to $11,475 in value.

Disability or health benefits.





SET #2 WILDCARD EXEMPTION SCHEME

Debtors can generally keep:

Homestead- Real or personal property, including co-op, used as a residence up to $22,075.

Burial plot up to $22,075, instead of homestead.

WILDCARD-- $1,175 of any property COMBINED with the unused amount of burial or homestead exemption above. Accordingly, if you have not used any homestead or burial exemption, your total available wildcard will be $23,250. This you can combine with other exemptions. Say for example your car has a net value of $10,000. You can use your $3,525.00 exemption below and take $6,475.from your wildcard to protect your car. Thereafter, you will still have $16,775 of wildcard remaining to protect whatever else you need.

Motor vehicle up to $3,525.

Clothing, household goods, appliances, furnishings, animals, books, musical instruments, and crops up to $550 per item.

$1,425.00 of jewelry.

Health aids.

Wrongful death recoveries needed for support.

Personal injury recoveries up to $22,075, not to include pain, suffering, or pecuniary loss.

11 U.S.C. § 522 - Tax exempt retirement accounts (including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans).

ERISA-qualified benefits needed for support.

Unemployment compensation, Social Security, Veteran's benefits, and public assistance.

Crime victim's compensation.

Tools, books, and implements of trade up to $2,200.

Alimony and child support needed for support.

Life insurance proceeds needed for support.

Unmatured life insurance policy, other than credit.

Unmatured life insurance contract accrued interest, dividends, loan, cash, or surrender value up to $11,800.

Disability benefits.

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THE ABOVE IS JUST A GENERAL LIST AND SHOULD NOT BE RELIED UPON. EXEMPTIONS AND AMOUNTS CHANGE OFTEN. AS A MATTER OF FEDERAL LAW, MOST QUALIFIED PENSIONS AND RETIREMENT ACCOUNTS ARE PROTECTED, IN SPITE OF OR IN ADDITION TO STATE LAW. IT IS IMPORTANT TO NOTE THAT TO USE CALIFORNIA EXEMPTIONS, A PERSON MUST HAVE BEEN DOMICILED HERE FOR THE PRECEDING 730 DAYS. IF NOT, A QUALIFIED ATTORNEY SHOULD MAKE THE APPROPRIATE ANALYSIS. THE RESULT COULD BE THE NEED TO USE ANOTHER STATE'S EXEMPTIONS, FEDERAL EXEMPTIONS, OR THE OPPORTUNITY TO CHOSE BETWEEN THEM. LASTLY, MARRIED DEBTORS IN CALIFORNIA DO NOT GET TO DOUBLE THE ABOVE EXEMPTIONS. FOR THE MOST PART, A COUPLE GETS TO KEEP THE SAME AMOUNT OF PROPERTY AS A SINGLE PERSON AND THEY CANNOT FILE SEPARATE BANKRUPTCIES WHILE ELECTING DIFFERENT EXEMPTION SCHEMES. THIS AREA OF THE LAW IS TRICKY/ WE HONESTLY DO NOT KNOW EVERYTHING AND NO INDIVIDUAL SHOULD RELY ON UNCONFIRMED INFORMATION THEY HAVE GLEANED FROM THE INTERNET.