Helping individuals and businesses
Many people are under the impression that the Bankruptcy Court takes everything a person owns when they file a Bankruptcy. This is not the case. Persons filing Chapter 7 may keep all exempt property and can often arrange to purchase non-exempt items they desire to keep from their case Trustees. Debtors filing Chapter 13 do not usually turn over any of their property. Because California has opted out of the Federal Bankruptcy Exemptions, persons filing in California must generally utilize the California state exemptions, summarized below.
One unique feature of the California bankruptcy exemptions is that there are two sets of exemptions available to debtors. One set of exemptions is found in California Code of Civil Procedure 703 and the other is found in Code of Civil Procedure 704. In general, the Section 703 exemptions mirror the federal exemptions and are typically used by debtors who do not own real property. The 703 exemptions provide for a smaller homestead exemption but allow for use of the unused homestead exemption as a sort of wildcard to protect any property. In contrast, the Section 704 exemptions have a large homestead exemption but no wildcard.
In preparing a California bankruptcy filing it is generally necessary for us to analyze the case under both exemption schemes to fully advise our clients of the best set to utilize.
Quick Reference Guide to the California Bankruptcy Exemptions.
California Exemptions Set 1
Homestead or Burial Plot
Debtors may claim a homestead exemption in up to $22,075.00 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence, in a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence, or in a burial plot for the debtor or a dependent of the debtor. CCP 703.140(b)(1).
Debtors may exempt one car with fair market value up to $3,525.00. Married filers may not double. CCP 703.140(b)(2).
Read more about how car loans are treated…
Money & Other Property
Debtors may use the “wildcard” exemption for money and other property. The wildcard provides an exemption for the debtor’s interest in any property not to exceed $1,175.00 plus the unused portion of the homestead exemption. Thus, the total wildcard exemption is $23,250.00 if none of the homestead exemption is used.
Household Goods & Furnishings
Debtors may claim an unlimited exemption in household furnishings, household goods, wearing apparel, appliances, books, animals, crops, or musical instruments that are held primarily for the personal, family, or household use of the debtor or a dependent of the debtor. The value of any particular item may not exceed $550.00. CCP 703.140(b)(3).
Debtors may exempt up to $1000 in all engagement and wedding rings. A.R.S. § 33-1125(4). Married filers may double this exemption. CCP 703.140(b)(4).
Tools of the Trade & Books
Debtors may exempt up to $2,200.00 in any implements, professional books, or tools of the trade of the debtor or the trade of a dependent of the debtor. CCP 703.140(b)(6).
Debtors may exempt up to $11,800.00 in accrued dividends or interest under, or loan value of, any unmatured life insurance contract owned by the debtor under which the insured is the debtor or an individual whom the debtor is a dependent. CCP 703.140(b)(8). For unmatured life insurance proceeds there is no limit but the exemption does not apply to credit life insurance contracts. CCP 703.140(b)(7).
Debtors may exempt all professionally prescribed health aids for the debtor or a dependent of the debtor. CCP 703.140(b)(9).
Support, Maintenance, Social Security, & Public Assistance
Debtors may exempt all rights to receive Social Security, unemployment compensation, local public assistance, veterans’ benefits, disability, illness, unemployment benefit, alimony, support, or separate maintenance, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor. CCP 703.140(b)(10)(A)-(D).
Pensions & Profit Sharing Plan Payments
Debtors may exempt a payment under a stock bonus, pension, profit-sharing, annuity, or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor, unless all of the following apply: (i) That plan or contract was established by or under the auspices of an insider that employed the debtor at the time the debtor’s rights under the plan or contract arose. (ii) The payment is on account of age or length of service. (iii) That plan or contract does not qualify under Section 401(a), 403(a), 403(b), 408, or 408A of the Internal Revenue Code of 1986. CCP 703.140(b)(10)(E).
Crime Victim’s Reparations
Debtors may exempt all rights to receive money under a crime victim’s reparation law. CCP 703.140(b)(11)(A).
Wrongful Death Benefits
Debtors may exempt all rights to receive money on account of a wrongful death of an individual whom the debtor was a dependent, to the extent necessary for the support of the debtor and any dependent of the debtor. CCP 703.140(b)(11)(B).
Life Insurance Proceeds
Debtors may exempt all rights to receive money under a life insurance contract that insured the life of an individual of whom the debtor was a dependent on the date of that individual’s death to the extent reasonably necessary for the support of he debtor and any dependent of the debtor. CCP 703.140(b)(11)(C).
Personal Injury Awards
Debtors may exempt up to $22,075.00 in any right to receive payment on account of personal bodily injury, not including pain and suffering or compensation for actual pecuniary loss, of the debtor or an individual of whom the debtor is a dependent. CCP 703.140(b)(11)(D).
Loss of Future Earnings
Debtors may exempt all rights to receive payment in compensation of loss of earnings of the debtor or of an individual whom the debtor is or was a dependent, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor. CCP 703.140(b)(11)(E).
California Exemptions Set 2
Debtors may claim a homestead exemption as follows:
- Up to $75,000.00. CCP 704.730(a)(1).
- Up to $100,000.00 if the debtor or spouse living in the residence and there is at least one family member living in the homestead that has no interest or their interest or whose only interest is a community interest with the debtor. CCP 704.730(a)(2).
- Up to $175,000.00 if the debtor or spouse of the debtor who resides in the homestead is a person 65 years of age or older, mentally or physically disabled, or is 55 years of age or older with a gross annual income of not more than $15,000.00 (or $20,000.00 if the debtor is married). CCP 704.730.(a)(3).
Debtors may exempt up to $2,725.00 in one motor vehicle (any combination of aggregate equity, proceeds of execution sale, and proceeds of insurance or other indemnification for loss, damage, or destruction). CCP 704.010.
Household Goods & Furnishings
Debtors may claim an unlimited exemption in household furnishings, appliances, provisions, wearing apparel, and other personal effects that ordinarily and reasonably necessary to, and personally used or procured for use by, the debtor and members of the debtor’s family at the debtor’s principal place of residence. CCP 704.020.
Residential Building Materials
Debtors may exempt up to $2,875.00 in materials that in good faith is about to be applied to the repair or improvement of a the debtor’s principal residence. CCP 704.030.
Debtors may exempt up to $7,175.00 in all jewelry, heirlooms, and works of art. CCP 704.040.
Debtors may exempt all health aids reasonably necessary to enable the debtor or the spouse of or a dependent of the debtor to work or sustain health, and prosthetic and orthopedic appliances. CCP 704.050.
Tools of the Trade
Debtors may exempt up to up to $7,171.00 in tools, implements, instruments, materials, uniforms, furnishings, books, equipment, one and one commercial vehicle (not to exceed $4,850.00 in value) if reasonably necessary to and actually used by the debtor in the exercise of the trade, business, or profession by which the debtor earns a livelihood. These amounts may be doubled by married filers who exercise the same trade together (up to $14,350.00 and two commercial vehicles up to $9,700.00). CCP 704.060.
Debtors may exempt all or 75% of “paid earnings,” as defined in CCP 706.011, that were paid during the 30-day period prior to filing. CCP 704.070.
Public Benefits in Deposit Accounts
Debtors may exempt the following amounts in deposit accounts:
- Public benefits (one depositor designated as payee) up to $1,425.00
- Social Security Benefits (one depositor designated as payee) up to $2,875.00
- Public Benefits (two or more depositors designated as payees) up to $2,150.00
- Social Security Benefits (two or more depositors designated as payees) up to $4,300.00
The amount of a deposit account that exceeds exemption amounts is also exempt to the extent it consists of payments of public benefits or Social Security Benefits. CCP 704.080(c).
Debtors may exempt up to $11,475.00 in aggregate loan value of unmatured life insurance policies. CCP 704.100.
Public Retirement Benefits
Debtors may exempt all public retirement benefits. CCP 704.110.
State or Public Employee Vacation Credits
Debtors may exempt all accumulated vacation credits accrued pursuant to Section 18050 of the Government Code or pursuant to any law. CCP 704.113.
Private Retirement Plans & Benefits
Debtors may exempt all private retirement plans, including self-employed retirement plans and individual retirement accounts or other accounts provided for by the IRC of 1986 including IRAs qualified under Section 408 or 408A to the extent the amounts held in the plans, annuities, or accounts do not exceed the maximum amounts exempt from federal income taxation under that code. This provision also includes most annuities, pensions, retirement allowances, disability payments, or death benefits from a private plan. CCP 704.115.
Unemployment & Disability
Debtors may exempt all unemployment, disability, and strike benefits. CCP 704.120.
Private Disability & Health Insurance Benefits
Debtors may exempt all private disability and health insurance benefits. CCP 704.130.
Personal Injury & Wrongful Death Causes of Action
Debtors may exempt all causes of action for personal injury & wrongful death including awards and settlements reasonably necessary for the support of the debtor and the spouse and dependents of the debtor. CCP 704.140, 704.150. Periodic payments and structured settlements are treated like earnings.
Worker’s Compensation Benefits
Debtors may exempt all worker’s compensation benefits. CCP 704.160.
Debtors may exempt all public aid and welfare benefits. CCP 704.170.
Debtors may exempt all relocation benefits paid pursuant to Title 1 of the Government Code or the federal “Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970.” . CCP 704.180.
Student Financial Aid
Debtors may exempt all financial aid for expenses while attending school provided to a student by an institution of higher education. CCP 704.190.
The provisions of 11 U.S.C. § 522 determine whether a California resident has been domiciled in California long enough to require use of the California exemptions. The analysis looks at the domicile history of the debtor for a 730 day period prior to when the case was filed. If a debtor has not been in California for 730 days, it is then necessary to analyze domicile during the 180 days prior to the 730 day period. If during that 180 day period the person was domiciled in California for the longest period of time, then they may take the California state exemptions. If the domicile tests indicate domicile in another state, a person filing in California will be required to utilize that particular state’s exemptions even though their case is filed in California. In rare cases, the federal exemptions may have to be used if no state’s exemptions apply.